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*/ No change has been made to Temp. Treas. Reg. section
35a.3406-1(f)(1), which provides that a payor shall treat the
receipt of two or more notices in a calendar year with respect to
a payee as the receipt of one notice for purposes of this rule.
September 24, 1991
TO: TAX MEMBERS NO. 40-91
OPERATIONS MEMBERS NO. 23-91
CLOSED-END FUND MEMBERS NO. 41-91
UNIT INVESTMENT TRUST MEMBERS NO. 43-91
TRANSFER AGENT ADVISORY COMMITTEE NO. 44-91
RE: IRS REVENUE PROCEDURE AND AMENDED TEMPORARY REGULATIONS ON
"B" NOTICES
__________________________________________________________
The attached IRS revenue procedure and amended temporary
regulations provide additional guidance on the procedures to be
followed this fall upon receipt of notification from the IRS or a
broker, pursuant to a "B" Notice, that a payee's taxpayer
identification number ("TIN") is "incorrect". The revenue
procedure provides rules for use when a payor has received
notification from IRS or a broker twice */1 within three calendar
years that a payee's name and TIN do not "match", the so-called
"2-in-3" rule. The new temporary regulations amend the "B"
Notice rules that were included in regulations issued last year.
(See Institute Memorandum to Tax Members No. 37-90, Operations
Members No. 27-90, Closed-End Fund Members No. 36-90, Unit
Investment Trust Members No. 61-90 and Transfer Agent Advisory
Committee No. 34-90, dated September 21, 1990.)
The revenue procedure provides that if a payor receives
notification from the IRS or a broker twice within three calendar
years that a payee's TIN is incorrect, the payor must:
(1) disregard any further TINs, whether or not certified
under penalties of perjury, received from the payee
unless the Social Security Administration ("SSA") or
the IRS has notified the payor that such TIN is
correct;
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(2) provide the payee with a notice setting forth certain
information, discussed below; and
(3) impose backup withholding on reportable payments made
to the account for the period (a) beginning no later
than after the close of the day 30 business days after
the date the payor is notified of the incorrect TIN,
unless the SSA (or the IRS, in the case of an employer
identification number ("EIN")) has notified the payor
of a valid TIN, and (b) ending within 30 calendar days
after receiving such notification of a valid TIN from
SSA (or IRS).
The revenue procedure further provides that the notice to
the payee must provide the payor's name and address and instruct
the payee to contact the Social Security Administration (if the
TIN is a social security number ("SSN")) or the IRS (if the TIN
is an EIN) to prevent backup withholding or to stop it once it
has begun. If the incorrect TIN is an SSN, the payee must be
instructed to (1) contact the SSA by telephone to request a Form
SS-5, Application for Social Security Card, (2) furnish to SSA a
completed Form SS-5 and any other documents required, along with
the payor's name and address, and (3) request that the SSA send
Form 7028 (Notice to Third Party of Social Security Number
Assignment) directly to the payor. If the incorrect TIN is an
EIN, the payee must be instructed to contact the Internal Revenue
Service Center where the payee's tax returns are filed and
request, in writing, that the IRS provide a Letter 147C to the
payee.
In addition, the revenue procedure provides that backup
withholding may be stopped under the 2-in-3 rule, in the case of
an SSN, only when SSA sends a Form 7028 directly to the payor.
If the TIN is an EIN, the payor may not stop withholding under
the 2-in-3 rule until the payee sends the payor (1) a copy of the
Letter 147C (verifying the payee's name and TIN), that has been
provided to the payee by the IRS, and (2) a completed Form W-9.
The amended regulations make several changes to the "B"
Notice rules. First, as discussed in the revenue procedure, if
the TIN is an SSN, the Social Security Administration, rather
than IRS, will notify the payor of the payee's correct TIN.
Second, a sole proprietor may furnish his individual name and
either his SSN or the EIN for the sole proprietorship. If the
business name for the sole proprietorship is also provided, the
sole proprietor's individual name must be provided first. Third,
a substitute "B" Notice no longer must instruct the payee to
return to the payor a statement affirming that the payee has
contacted the SSA or the IRS. Fourth, the effective date for the
"B" Notice rules in the regulations is amended to clarify that
"informational" B Notices received prior to September 1, 1990 are
not treated as first notices for purpose of the 2-in-3 rule. The
regulations also revise the appendix to section 35a.3406-1, which
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provides a sample substitute payee notice.
We will keep you informed of developments.
Keith D. Lawson
Associate Counsel - Tax
Attachments
KDL:bmb