[Code of Federal Regulations] [Title 26, Volume 12] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR1.1443-1] [Page 159-160] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) PART 1_INCOME TAXES--Table of Contents Sec. 1.1443-1 Foreign tax-exempt organizations. (a) Income includible under section 512 in computing unrelated business taxable income. In the case of a foreign organization that is described in section 501(c), amounts paid to the organization includible under section 512 in computing the organization's unrelated business taxable income are subject to withholding under Sec. Sec. 1.1441-1, 1.1441-4, and 1.1441-6 in the same manner as payments of the same amounts to any foreign person that is not a tax-exempt organization. Therefore, a foreign organization receiving amounts includible under section 512 in computing the organization's unrelated business taxable income may claim an exemption from withholding or a reduced rate of withholding with respect to that income in the same manner as a foreign person that is not a tax-exempt organization. See Sec. 1.1441-9(b)(3) for presumption that amounts are includible under section 512 in computing the organization's unrelated business taxable income in the absence of a reliable certification. (b) Income subject to tax under section 4948--(1) In general. The gross investment income (as defined in section 4940(c)(2)) of a foreign private foundation is subject to withholding under section 1443(b) at the rate of 4 percent to the extent that the income is from sources within the United States and is subject to the tax imposed by section 4948(a) and the regulations under that section. Withholding under this paragraph (b) is required irrespective of the fact that the income may be effectively connected with the conduct of a trade or business in the United States by the foreign organization. See Sec. 1.1441-9(b)(3) for applicable presumptions that amounts are subject to tax under section 4948. The withholding imposed under this paragraph (b)(1) does not obviate a private foundation's obligation to file any return required by law with respect to such organization, such as the form that the foundation is required to file under section 6033 for the taxable year. (2) Reliance on a foreign organization's claim of foreign private foundation status. For reliance by a withholding agent on a foreign organization's claim of foreign private foundation status, see Sec. 1.1441-9 (b) and (c). (3) Applicable procedures. A withholding agent withholding the 4- percent amount pursuant to paragraph (b)(1) of this section shall treat such withholding as withholding under section 1441(a) or 1442(a) for all purposes, including reporting of the payment on a Form 1042 and a Form 1042-S pursuant to Sec. 1.1461-1 (b) and (c). Similarly, the foreign private foundation shall treat the 4-percent withholding as withholding under section 1441(a) or 1442(a), including for purposes of claims for refunds and credits. (4) Claim of benefits under an income tax treaty. The withholding procedures applicable to claims of a reduced rate under an income tax treaty are governed solely by the provisions of Sec. 1.1441-6 and not by this section. (c) Effective date--(1) In general. This section applies to payments made after December 31, 2000. (2) Transition rules. For purposes of this section, the validity of an affidavit or opinion of counsel described in Sec. 1.1443-1(b)(4)(i) in effect prior to January 1, 2001 (see Sec. 1.1443-1(b)(4)(i) as contained in 26 CFR part 1, revised April 1, 1999) is extended until December 31, 2000. However, a withholding agent may choose to not take advantage of the transition rule in this paragraph (c)(2) with respect to one or more withholding certificates valid under the regulations in effect prior to January [[Page 160]] 1, 2001 (see 26 CFR part 1, revised April 1, 1999) and, therefore, to require withholding certificates conforming to the requirements described in this section (new withholding certificates). For purposes of this section, a new withholding certificate is deemed to satisfy the documentation requirement under the regulations in effect prior to January 1, 2001 ( see 26 CFR part 1, revised April 1, 1999). Further, a new withholding certificate remains valid for the period specified in Sec. 1.1441-1(e)(4)(ii), regardless of when the certificate is obtained. [T.D. 8734, 62 FR 53466, Oct. 14, 1997, as amended by T.D. 8804, 63 FR 72186, Dec. 31, 1998; T.D. 8856, 64 FR 73411, Dec. 30, 1999]