FATCA Withholding Exception for Low-Risk Entities

§ 1471. Withholdable payments to foreign financial institutions(a) In generalIn the case of any withholdable payment to a foreign financial institution which does not meet the requirements of subsection (b), the withholding agent with respect to such payment shall deduct and withhold from such payment a tax equal to 30 percent of the amount of such payment. (b) Reporting requirements, etc.(1) In generalThe requirements of this subsection are met with respect to any foreign financial institution if an agreement is in effect between such institution and the Secretary under which such institution agrees—(A) to obtain such information regarding each holder of each account maintained by such institution as is necessary to determine which (if any) of such accounts are United States accounts, (B) to comply with such verification and due diligence procedures as the Secretary may require with respect to the identification of United States accounts, (C) in the case of any United States account maintained by such institution, to report on an annual basis the information described in subsection (c) with respect to such account, (D) to deduct and withhold a tax equal to 30 percent of—(i) any passthru payment which is made by such institution to a recalcitrant account holder or another foreign financial institution which does not meet the requirements of this subsection, and (ii) in the case of any passthru payment which is made by such institution to a foreign financial institution which has in effect an election under paragraph (3) with respect to such payment, so much of such payment as is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection, (E) to comply with requests by the Secretary for additional information with respect to any United States account maintained by such institution, and (F) in any case in which any foreign law would (but for a waiver described in clause (i)) prevent the reporting of any information referred to in this subsection or subsection (c) with respect to any United States account maintained by such institution—(i) to attempt to obtain a valid and effective waiver of such law from each holder of such account, and (ii) if a waiver described in clause (i) is not obtained from each such holder within a reasonable period of time, to close such account. Any agreement entered into under this subsection may be terminated by the Secretary upon a determination by the Secretary that the foreign financial institution is out of compliance with such agreement. (2) Financial institutions deemed to meet requirements in certain casesA foreign financial institution may be treated by the Secretary as meeting the requirements of this subsection if—(A) such institution—(i) complies with such procedures as the Secretary may prescribe to ensure that such institution does not maintain United States accounts, and