ACTION REQUESTED
December 15, 1994
VIA FAX
TO: OPERATIONS COMMITTEE No. 33-94
TAX COMMITTEE No. 37-94
TRANSFER AGENT ADVISORY COMMITTEE No. 48-94
TASK FORCE ON NONRESIDENT ALIEN WITHHOLDING
RE: DRAFT INSTITUTE COMMENT LETTER ON NONRESIDENT ALIEN
WITHHOLDING
______________________________________________________________________________
As we previously informed you, the Internal Revenue Service ("IRS") for several years has been
studying tax compliance issues relating to nonresident alien ("NRA") investors with a view toward
revising the tax withholding regulations under Internal Revenue Code section 1441. The IRS has
indicated that it hopes to issue new proposed regulations in the near future.
The IRS is considering extensive changes to the current rules governing NRA investors. Major
aspects of the proposal under consideration include:
1. All NRA investors receiving U.S. source income would be required to obtain a U.S.
Taxpayer Identification Number ("TIN"). Backup withholding would apply to any payments
made to foreign investors who do not supply a TIN to the payor.
2. NRA investors could obtain TINs directly from the IRS or by submitting an application
to a foreign or domestic financial institution that has entered into an agreement with the IRS to
act as an agent for the IRS' in receiving and processing TIN applications. U.S. mutual funds or
broker-dealers would be eligible to process TIN applications for NRA investors.
3. NRA investors seeking a TIN would have to supply supporting documents establishing
their identity and foreign residence. Such documentation might include passports, birth
certificates or identification cards issued by a foreign government.
4. NRA investors seeking treaty rate withholding would be required to prove that they are
entitled to treaty benefits when they apply for a TIN.
5. Foreign financial institutions would have to indicate whether they hold investments for
their own account or as a nominee. An institution holding investments as a nominee under
some circumstances would be able to provide a single certification that all beneficial owners it
represents are NRA investors, and could indicate whether those investors are entitled to treaty
benefits.
Attached is a draft letter commenting on the IRS proposal. Please provide any comments
regarding the draft letter to the undersigned, by 12:00 noon on December 23, 1994. (Phone 202-326-
5837; Fax 202-326-5841).
We will keep you informed of further developments.
Peter J. Cinquegrani
Assistant Counsel-Tax
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