[Code of Federal Regulations]
[Title 26, Volume 15]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR31.3406(d)-2]

[Page 282-283]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
 
              Subpart E_Collection of Income Tax at Source
 
Sec. 31.3406(d)-2  Payee certification failure.

    (a) Requirement to backup withhold. Withholding under section 
3406(a)(1)(D) applies to a reportable interest or dividend payment (as 
defined in section 3406(b)(2)) if, and only if, the payee fails to 
certify to the payor, under penalties of perjury, that the payee is not 
subject to withholding due to notified payee underreporting under 
section 3406(a)(1)(C). The period for which withholding applies is 
described in Sec. 31.3406(e)-1(e). See Sec. 31.3406(d)-3(a) for 
special rules when an account is established directly with, or an 
instrument is acquired directly from, the payor by electronic 
transmission or by mail. See Sec. 31.3406(c)-1(c)(3)(iv) for rules with 
respect to a payor's reliance on a payee certification for a new account 
following notified payee underreporting. See Sec. 31.3406(d)-4 for 
special rules relating to the acquisition of a readily tradable 
instrument through a broker. The certificate on which the certification 
should be made is described in Sec. 31.3406(h)-3.
    (b) Exceptions. Withholding under section 3406(a)(1)(D) and 
paragraph (a) of

[[Page 283]]

this section does not apply to reportable interest or dividend payments 
(as defined in section 3406(b)(2)) made--
    (1) With respect to a pre-1984 account (as defined in Sec. 
31.3406(d)-1(b)(1));
    (2) In a window transaction (as defined in Sec. 31.3406(b)(2)-
3(b));
    (3) With respect to a readily tradable instrument described in Sec. 
31.3406(d)-1(b)(2)(iv) or Sec. 31.3406(d)-4(a)(3); or
    (4) During the period and with respect to an account or readily 
tradable instrument described in Sec. 31.3406(d)-3.

[T.D. 8637, 60 FR 66125, Dec. 21, 1995]