[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(g)-1] [Page 294-295] 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(g)-1 Exception for payments to certain payees and certain other payments. (a) Exempt recipients--(1) In general. A payor of any reportable payment (as defined in section 3406(b)) must not withhold under section 3406 if the payee is-- (i) An organization exempt from taxation under section 501(a) or an individual retirement account; (ii) The United States or any wholly owned agency or instrumentality thereof; (iii) A state, the District of Columbia, a possession of the United States, any political subdivision of any of the foregoing, or any wholly owned agency or instrumentality of any one or more of the foregoing; (iv) A foreign government, a political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing (as defined in regulations under section 892); or (v) An international organization or any wholly owned agency or instrumentality thereof (as defined in section 7701(a)(18)). (2) Nonexclusive list. Paragraph (a)(1) of this section does not prescribe an exclusive list of payees that are exempt from information reporting and also are exempt from withholding under section 3406. (b) Determination of whether a person is described in paragraph (a)(1) of this section. The determination of whether a person is a payee described in paragraph (a)(1) of this section must be made as provided in the applicable provisions of section 6049 and the regulations issued thereunder. A payor, even if permitted to treat a person as an exempt recipient without requiring a certificate under the provisions of section 6049, may require a payee, otherwise not required to file a certificate regarding its exempt status, to file a certificate and may treat a payee who fails to file the certificate as a person who is not an exempt recipient. See Sec. 31.3406(h)-3 for a description of the Form W-9 or a substitute form prescribed under section 3406 for claiming exempt status. (c) Prepaid or advance premium life-insurance contracts. A payor of a reportable payment (as defined in section 3406(b)(1)) may, but is not required to, withhold under section 3406 on reportable payments made from January 1, 1984, to December 31, 1996, on prepaid or advance premium life-insurance contracts to a payee who is the owner for tax purposes of the prepaid or advance premium life-insurance contract. For purposes of this exception from backup withholding, a prepaid or advance premium life-insurance contract is one entered into on or before June 30, 1984, by the payee and under which the increment in value of the prepaid or advance premium is used for the payment of premiums during the period in which the exception from backup withholding applies. (d) Reportable payments made to Canadian nonresident alien individuals. A payment of interest made to a Canadian nonresident alien individual under Sec. 1.6049-8(a) of this chapter is not subject to withholding under section 3406. (e) Certain reportable payments made outside the United States by foreign persons, foreign offices of United States banks and brokers, and others. For reportable payments made after December 31, 2000, a payor is not required to backup withhold under section 3406 on a reportable payment that qualifies for the documentary evidence rule described in Sec. 1.6049-5(c)(1) or (4) of this chapter, whether or not documentary evidence is actually provided to the payor, unless the payor has actual knowledge that the payee is a United States person. Further, no backup withholding is required for payments upon which a 30-percent amount was withheld by another payor in accordance with the withholding provisions under chapter 3 of the Internal Revenue Code and the regulations under that chapter. For rules applicable to [[Page 295]] notional principal contracts, see Sec. 1.6041-1(d)(5) of this chapter. [T.D. 8637, 60 FR 66128, Dec. 21, 1995, as amended by T.D. 8664, 61 FR 17574, Apr. 22, 1996; T.D. 8734, 62 FR 53493, Oct. 14, 1997; T.D. 8804, 63 FR 72189, Dec. 31, 1998; T.D. 8856, 64 FR 73412, Dec. 30, 1999]