Qualified Intermediary Agreement
Summary
SIFMA provided comments to the Internal Revenue Service (IRS) on Notice 2022-23. We request that the following be taken into consideration when drafting the forthcoming Qualified Intermediary Agreement (new QI Agreement).
Excerpt
May 27, 2022
Mr. John Sweeney
Office of Associate Chief Counsel, International
Special Counsel
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224
Re: Comments on Notice 2022-23 (the “Notice”)
The Securities Industry and Financial Markets Association (“SIFMA”)1 welcomes the opportunity to comment on Notice 2022-23 (the “Notice”). We request that the following be taken into consideration when drafting the forthcoming Qualified Intermediary Agreement (“new QI Agreement”).
1. Requirement that a Qualified Intermediary (“QI”) Obtain a U.S. TIN on Withholding Certificates
- Overall Transition Relief for Obtaining a U.S. TIN for Forms W-8 Validity and Treaty Claims Purposes. The Notice does not provide any relief to QIs that cannot obtain a U.S. TIN from account holders that are partners in a publicly traded partnership (“PTP”) prior to January 1, 2023. Given the challenges in obtaining a U.S. TIN by non-U.S. account holders, and considering the short time frame required for the QI to obtain a U.S. TIN (only six months), the IRS should provide transition relief from obtaining a U.S. TIN from account holders for purposes of the overall Forms W-8 validity and for ascertaining treaty benefits claims on Forms W-8. Accordingly, we request that the new QI Agreement provide that for all QIs a Form W-8 without a U.S. TIN will be valid for purposes of sections 1446(a) and 1446(f) until the later of (1) January 1, 2024 or (2) the date an existing Form W-8 expires (at the end of the third calendar year following the year in which the form was received).
- Clarify a QI’s Obligation to Exercise “Best Efforts” to Obtain U.S. TINs. The Notice provides that QIs must use “best efforts” to obtain the required documentation (e.g., Form W-8BEN with a U.S. TIN) from a partner in a PTP. The IRS should clarify that the existing “reasonable cause” requirements for missing TIN penalties establish a “best efforts” safe harbor (i.e., making an initial solicitation and two follow-up solicitations). See Treas. Reg. § 301.6724-1(e). The IRS should clarify that the initial solicitation may be performed at either: (1) account opening or (2) any time prior to the due date of the first Form 1042-S reporting payments with respect to the PTP acquired.
1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. For more information, visit http://www.sifma.org.