January 20, 1993
TO: TAX COMMITTEE NO. 5-93
TRANSFER AGENT ADVISORY COMMITTEE NO. 7-93
RE: DRAFT LETTER TO IRS ON NONRESIDENT ALIEN INVESTOR
COMPLIANCE ISSUES
__________________________________________________________
As you may know, the Internal Revenue Service ("IRS") has
been studying tax compliance issues relating to nonresident alien
("NRA") investors with a view toward revising the tax withholding
regulations under Code section 1441. The attached draft letter
to IRS suggests the following changes to simplify reporting and
withholding with respect to NRA shareholders:
1) certified IRS Forms W-8 should not expire after
three years;
2) a new IRS Form should be provided for certifying
U.S. citizenship while residing abroad;
3) the "address rule" of Treas. Reg. Sec. 1.1441-
3(b)(3) (which requires a payor of dividends with
no definite knowledge of a shareholder's status to
impose withholding under section 1441 if the
shareholder's address is outside the U.S. and
permits the payor to assume that a shareholder is a
U.S. citizen or resident if the shareholder's
address is within the U.S.) should be retained;
4) payors who incorrectly underwithhold tax should be
provided with express authority to recover from the
NRA shareholder the additional tax due;
5) payors should be permitted to reverse
overwithholding regardless of (a) whether the
overwithholding is "erroneous" or has been caused
by the payee and (b) when the "error" is discovered
or otherwise corrected; and
6) IRS regulations should be modified to reflect the
instructions to IRS Forms 1078 and 4224 and clarify
that copies of these forms should not be sent to
the IRS.
The Tax Committee will discuss this draft letter at its
meeting on January 28. Please submit any suggestions or other
comments with respect to the letter to me either at the Tax
Committee meeting or by telephone (202-955-3585) no later than
February 1.
We will keep you informed of developments.
Keith D. Lawson
Associate Counsel - Tax
Attachment