Recommendations in anticipation of revisions to the QI Agreement
Summary
SIFMA provided comments on the Qualified Intermediary (QI) Agreement in advance of anticipated revisions. While we understand the Internal Revenue Service’s intention to publish a final version without an advance opportunity for public comment, we hope our recommendations will be taken under consideration.
SIFMA recommends that the QI Agreement (or new FAQ) allow QIs the option of using the combination of an individual’s (1) passport and (2) COR issued by an authorized government body (for example, a government or agency thereof, or a municipality) of the country in which the individual claims to be a resident, in order to establish eligibility for treaty benefits under Section 5.03(A).
An acceptable COR for this purpose, therefore, would not need to be issued by a tax official or indicate that the taxpayer filed its most recent income tax return (which would be in line with the IGA standard, but in contrast to the standard in the chapter 3 regulations). Thus, treaty benefits could be based on the country identified in the COR, not the passport consistent with the general standard for treaty eligibility. Alternatively, treaty benefits could still be based on the passport’s country of issuance.
Excerpt
Ms. Nancy Erwin
Office of Associate Chief Counsel, International
Branch Chief, Branch 1
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224
Mr. John Sweeney
Office of Associate Chief Counsel, International
Special Counsel, Branch 1
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224
Ms. Kim Schoenbacher
Director, Field Operations Foreign Payments Practice
Internal Revenue Service
290 Broadway, 12th Floor
New York, NY 10007
Mr. Yuen Chan
Senior Manager, FPP Program Office
Internal Revenue Service
290 Broadway, 12th Floor
New York, NY 10007
Re: Recommendations in anticipation of revisions to the Qualified Intermediary Agreement
Dear Gentlemen and Madams:
The Securities Industry and Financial Markets Association (“SIFMA”)1 is pleased to submit comments on the Qualified Intermediary (“QI”) Agreement2 in advance of anticipated revisions. While we understand the Internal Revenue Service’s (“IRS”) intention to publish a final version without an advance opportunity for public comment, we hope our recommendations will be taken under consideration. SIFMA members may have additional comments once the final agreement is published as well.
1. Request for an extension of RO certification to July 1
The QI Agreement as written sets the deadline at December 31 of the year following the three-year certification period when the third year of the certification period is chosen for the periodic review. When the third year is chosen for the periodic review, it gives little time to the financial institution since the extended due date of Form 1042 falls in September, a few months before the Responsible Officer (“RO”) certification is due. Moreover, the deadline is even more unrealistic in the case of those QIs that want to file as part of a Consolidated Compliance Group (“CCG”). This is because those institutions must first file the CCG request (which requires information with respect to the QI accounts for the third year of the certification period, including a proposed sample plan) and then wait for IRS approval of the plan, which may take several weeks or months. In light of this, we are pleased that the IRS extended the last RO certification until March of the next year in response to industry concerns raised. However, resource constraints due to tax reporting season make this March deadline difficult for the operations teams involved in the periodic review and RO certification process. Therefore, we request that the upcoming QI Agreement allow those firms that choose the third year of the certification period for their periodic review to have up until July 1 of the second year after the end of the certification periodic to submit their RO certification. This would create parity amongst QIs that wish to select different tax years, and provide sufficient time to prepare for the RO certification.