[Code of Federal Regulations] [Title 26, Volume 13] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR] [Page 224-225] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) Procedure and Administration--Table of Contents Sec. 1.6042-3 Dividends subject to reporting. (a) In general. Except as provided in paragraph (b) of this section, the term dividend for purposes of this section and Sec. Sec. 1.6042-2 and 1.6042-4 means the amounts described in the following paragraphs (a) (1) through (3) of this section-- (1) Any distribution made by a corporation to its shareholders which is a dividend as defined in section 316; and (2) Any payment made by a stockbroker to any person as a substitute for a dividend. Such a payment includes any payment made in lieu of a dividend to a person whose stock has been borrowed. See Sec. 1.6045- 2(h) for coordination of the reporting requirements under sections 6042 and 6045(d) with respect to such payments; and (3) A distribution from a regulated investment company (irrespective of the fact that any part of the distribution may not represent ordinary income (i.e., may, for example, represent a capital gain dividend as defined in section 852(b)(3)(C)). (b) Exceptions--(1) In general. For purposes of Sec. Sec. 1.6042-2 and 1.6042-4, the amounts described in paragraphs (b)(1)(i) through (vii) of this section are not dividends. (i) Amounts paid by an insurance company to a policyholder, other than a dividend upon its capital stock. (ii) Payments (however denominated) by a mutual savings bank, savings and loan association, or similar organization, in respect of deposits, investment certificates, or withdrawable or repurchasable shares. See, however, section 6049 and the regulations under that section for provisions requiring reporting of these payments. (iii) Distributions or payments that a payor can, prior to payment, reliably associate with documentation upon which it may rely to treat as made to a foreign beneficial owner in accordance with Sec. 1.1441- 1(e)(1)(ii) or as made to a foreign payee in accordance with Sec. 1.6049-5(d)(1) or presumed to be made to a foreign payee under Sec. 1.6049-5(d) (2), (3), (4), or (5). However, such payments may be reportable under Sec. 1.1461-1(b) and (c). For purposes of this paragraph (b)(1)(iii), the provisions in Sec. 1.6049-5(c) (regarding rules applicable to documentation of foreign status and definition of U.S. payor and non-U.S. payor) shall apply. The provisions of Sec. 1.1441-1 shall apply by substituting the term payor for the term withholding agent and without regard to the fact that the provisions apply only to amounts subject to withholding under chapter 3 of the Internal Revenue Code (Code). (iv) Distributions or payments from sources outside the United States (as determined under the provisions of part I, subchapter N, chapter 1 of the Code and the regulations under those provisions) paid outside the United States by a non-U.S. payor or a non-U.S. middleman. For a definition of non-U.S. payor and non-U.S. middleman, see Sec. 1.6049-5(c)(5). For circumstances in which a payment is considered to be made outside the United States, see Sec. 1.6049-5(e). (v) Distributions or payments for the period that the amounts represent assets blocked as described in Sec. 1.1441-2(e)(3). The exemption in this paragraph (b)(1)(v) shall terminate when payment is deemed to occur in accordance with the rules of Sec. 1.1441-2(e)(3). (vi) Payments made by a foreign intermediary described in Sec. 1.1441-1(c)(13) of amounts that it has received in its capacity as an intermediary and that are associated with a valid withholding certificate described in Sec. 1.1441-1(e)(3)(ii) or (iii) and payments made by a U.S. branch of a foreign bank or of a foreign insurance company described in Sec. 1.1441-1(b)(2)(iv) (other than a U.S. branch that is treated as a U.S. person) that are associated with a valid withholding certificate described in Sec. 1.1441-1(e)(3)(v), which certificate the intermediary or branch has furnished to the payor or middleman from whom it has received the payment, unless, and to the extent, the intermediary or branch knows that the payments are required to be reported under Sec. 1.6042-2 and were not so reported. For example, if a foreign intermediary or U.S. branch described in Sec. 1.1441-1(b)(2)(iv) fails to provide information regarding U.S. persons that are not exempt from reporting under Sec. 1.6049-4(c)(1)(ii) to the person from whom the intermediary or U.S. branch receives the payment, the amount paid by the foreign intermediary or U.S. branch to such person [[Page 225]] is a dividend. The exception of this paragraph (b)(1)(vi) shall not apply to a qualified intermediary that assumes reporting responsibility under chapter 61 of the Internal Revenue Code. (vii) With respect to amounts paid or credited after December 31, 1982, any amount paid or credited to any person described in Sec. 1.6049-4(c)(1)(ii), unless a tax is withheld under section 3406 and is not refunded by the payor in accordance with Sec. 31.6413(a)-3 of this chapter (Employment Tax Regulations). (2) Payor. The term payor has the same meaning as described in Sec. 1.6049-4(a)(2). (3) Joint owners. Amounts paid to joint owners for which a certificate or documentation is required as a condition for being exempt from reporting under this paragraph (b) are presumed made to U.S. payees who are not exempt recipients if, prior to payment, the payor or middleman cannot reliably associate the payment either with a Form W-9 furnished by one of the joint owners in the manner required in Sec. Sec. 31.3406(d)-1 through 31.3406(d)-5 of this chapter, or with documentation described in paragraph (b)(1)(iii) of this section furnished by each joint owner upon which it can rely to treat each joint owner as a foreign payee or foreign beneficial owner. For purposes of applying this paragraph (b)(3), the grace period described in Sec. 1.6049-5(d)(2)(ii) shall apply only if each payee qualifies for such grace period. (4) Conversion into United States dollars of amounts paid in foreign currency. For rules concerning foreign currency conversion, see Sec. 1.6049-4(d)(3)(i). (5) Effective date--(i) General rule. The provisions of this paragraph (b) apply to payments made after December 31, 2000. (ii) Transition rules. The validity of a withholding certificate (namely, Form W-8 or other form upon which the payor is permitted to rely to hold the payee as a foreign person) that was valid on January 1, 1998, under the regulations in effect prior to January 1, 2001 (see 26 CFR parts 1 and 35a, revised April 1, 1999) and expired, or will expire, at any time during 1998, is extended until December 31, 1998. The validity of a withholding certificate that is valid on or after January 1, 1999, remains valid until its validity expires under the regulations in effect prior to January 1, 2001 (see 26 CFR parts 1 and 35a, revised April 1, 1999) but in no event shall such withholding certificate remain valid after December 31, 2000. The rule in this paragraph (b)(5)(ii), however, does not apply to extend the validity period of a withholding certificate that expires solely by reason of changes in the circumstances of the person whose name is on the certificate. Notwithstanding the first three sentences of this paragraph (b)(5)(ii), a payor may choose not to take advantage of the transition rule in this paragraph (b)(5)(ii) with respect to one or more withholding certificates valid under the regulations in effect prior to January 1, 2001 (see 26 CFR parts 1 and 35a, 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 parts 1 and 35a, 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. (c) Special rule. If a person makes a payment which may be a dividend, or if a nominee receives a payment which may be a dividend, but such person or nominee is unable to determine the portion of the payment which is a dividend (as defined in paragraphs (a) and (b) of this section) at the time he files his return under Sec. 1.6042-2, he shall, for purposes of such section, treat the entire amount of such payment as a dividend. [T.D. 6628, 27 FR 12797, Dec. 28, 1962, as amended by T.D. 6908, 31 FR 16774, Dec. 31, 1966; T.D. 7987, 49 FR 42719, Oct. 24, 1984; T.D. 8029, 50 FR 23680, June 5, 1985; T.D. 8734, 62 FR 53475, Oct. 14, 1997; T.D. 8804, 63 FR 72186, Dec. 31, 1998; 64 FR 73411, Dec. 30, 1999; T.D. 8881, 65 FR 32205, May 22, 2000] [[Page 226]]