QI & FATCA News

The IRS recently announced it will soon begin a review of Global Intermediary Identification Numbers (“GIIN”) to identify unused sponsor GIINs. A dormant sponsor GIIN exists when no sponsored entities have been registered under the sponsor GIIN. The IRS will soon be notifying financial institutions (“FI”) with a dormant sponsor GIIN via the FATCA Portal and request its cancellation.

A sponsor GIIN is used to identify an FI (sponsor FI) that agrees to perform the FATCA due diligence and reporting on behalf of another FI (sponsored FI). The sponsor FI will register the sponsored FI on the FATCA Portal and the sponsored FI is issued a GIIN that is associated with the GIIN of the sponsor FI. Sponsor GIINs are commonly used for funds and trusts.

It is unclear how the IRS plans to address cases of certified deemed-compliant sponsored FIs. For example, the sponsor FI of a ‘Closely Held Investment Vehicle’ must hold a sponsor GIIN but the sponsored FI, as a certified deemed-compliant FI, is not issued a GIIN.

We recommend that FIs that possess a sponsor GIIN perform a review of their sponsor profile on the FATCA Portal to ensure that sponsored FIs are registered, and in case the sponsor GIIN in no longer needed to cancel the dormant sponsor GIIN.

The IRS is currently implementing enhanced sign in procedures for access to on-line services, including access to the QI Portal. The enhanced sign in procedure for the QI Portal will require users to create an account with ID.me. Once the ID.me account has been created, a second level password will be required which is sent to the user’s mobile phone.

Currently, once a user signs in to the QI portal a new page appears with the following options:

  • Create an ID.me account;
  • Sign in with ID.me; or
  • Sign in with an existing IRS username.

By selecting the last option (sign in with an existing IRS username) users can enter the QI Portal with their existing username and password without creating an ID.me account. The IRS has not indicated when the enhanced sign in procedure will be completed, thus it is recommended to migrate to an ID.me account.

In case a user selects to create an ID.me account, care needs to be taken to ensure that:

  • The ID.me user name exactly matches the email address associated with user.
  • The password must contain at least eight characters and include a lower case and upper case letter and a number.
  • The first name and last name of the user exactly matches the names registered on the QI Portal.

Before creating an ID.me account we recommend accessing the QI portal (with an existing IRS username) and conserve a copy of the current users and their associated email addresses.

Changes Incorporate New PTP Withholding and Reporting Rules – Notice 2022-23

The current QI agreement, Revenue Procedure 2017-15, will expire on December 31, 2022. The IRS has issued  Notice 2022-23 that contains changes to the QI agreement and the IRS is expected to publish the final version of the new QI agreement before the end of the year. The new QI agreement will take effect on January 1, 2023.

The primary changes to the QI agreement contained in Notice 2022-23 relate to recent US tax changes under section 1446(f), applicable to the sale of publicly traded partnership (“PTP”) interests by non-US persons. Under section 1446(f), the purchaser of a PTP interest from a non-US person must apply 10% withholding on the sales proceeds. Section 1446(a) retains the current withholding on PTP distributions to non-US partners: 37% in case of non-US individual partners and 21% for non-US corporate partners.

The changes in Notice 2022-23 are designed to facilitate withholding and reporting obligations of QIs whose clients hold PTP interests. Specifically, the changes cover three areas; documentation of non-US clients that invest in PTPs, implementation of procedures to ensure PTP transactions are properly taxed and reported, and nominee reporting.

Note that Notice 2022-23 also changes the documentation and reporting procedures for QIs that make payments of PTP distributions or proceeds from the sale of PTP interests to private arrangement intermediaries, nonqualified intermediaries, non-US partnerships and non-US trusts. Discussion of these changes are not addressed in this news alert.

The IRS has published a revised Form W-8BEN and instructions, October 2021 version. 

Changes to the form include:

  • Check-box to indicate if a foreign TIN is not leagally required;
  • Certification regarding withholding on proceeds from the sale of an interest in a U.S. partnership under IRC §1446(f); and
  • Check-box to certify authority to sign in case form is not signed by the beneficial owner.

pdf FORM W-8BEN (10-21) (66 KB)

pdf INST W-8BEN (10-21) (190 KB)