Par. 11. Section 1.1471-2 is amended by: 1. Revising paragraph (a)(4)(i)(A), redesignating paragraph (B) as new paragraph (E), and adding new paragraphs (B) through (D). 2. Amending paragraph (c) by adding a third and fourth sentence. The revisions and addition read as follows:
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(a) * * *
(4) * * *
(i) * * *
(A) In general. Except as provided in paragraph (a)(4)(i)(B) of this section, a withholding agent has an obligation to withhold under chapter 4 only to the extent that, at any time between the date that the obligation to withhold would arise (but for the provisions of this paragraph (a)(4)(i)(A)) and the due date (including extensions) for filing Form 1042 (including extensions) with respect to the calendar year in which the payment occurs, it has—
(1) Control over, or custody of, money or property owned by the recipient or beneficial owner from which to withhold an amount, and
(2) Knowledge of the facts that give rise to the payment.
(B) Exception not available. The exception from the obligation to withhold under paragraph (a)(4)(i)(A) of this section does not apply if—
(1) The withholding agent is related (within the meaning of section 482) to the recipient or the beneficial owner of the payment;
(2) The payment is with respect to stock (including a deemed distribution (as defined in § 1.305-1(d)(7)) of stock or a right to acquire stock) or other securities; however, the limited exception from the obligation to withhold on a deemed distribution provided in § 1.1441-2(d)(4) also applies to a deemed distribution that is a withholdable payment under chapter 4;
(3) The lack of control over or custody of money or property from which to withhold is part of a pre-arranged plan known to the withholding agent to avoid withholding under section 1471 or 1472;
(4) The amounts are described in § 1.860G-3(b)(1) (regarding certain partnership allocations of REMIC net income with respect to a REMIC residual interest);
(5) Any of the special rules described in § 1.1441-2(d)(2) or (3), regarding the obligation of a withholding agent with respect to cancellation of debt or the satisfaction of tax liability following underwithholding by a withholding agent, apply with respect to the payment (by applying such rules to payments that are withholdable payments under chapter 4); or
(6) The payment is a deemed payment (as defined in § 1.861-3(a)(6)); however, the limited exception from the obligation to withhold on a deemed payment provided in § 1.1441-2(d)(4) also applies to a deemed payment that is determined with respect to a deemed distribution on a specified security and that is a withholdable payment under chapter 4.
(C) Documentation. Any exception from withholding pursuant to paragraph (a)(4)(i)(A) of this section applies without a requirement that documentation be furnished to the withholding agent. However, documentation may have to be furnished for purposes of the information reporting provisions under chapter 61 of the Code and backup withholding under section 3406.
(D) Lack of money or property or lack of knowledge. A withholding agent does not lack control over money or property for purposes of this paragraph (a)(4)(i)(A) if the withholding agent directs another party to make the payment. Thus, for example, a principal does not cease to have control over a payment when it contracts with a paying agent to make the payments to its account holders in lieu of paying the account holders directly. Further, a withholding agent does not lack knowledge of the facts that give rise to a payment merely because the withholding agent does not know the character or source of the payment for U.S. tax purposes. See paragraph (a)(5) of this section for rules addressing a withholding agent's obligations when the withholding agent has knowledge of the facts that give rise to the payment, but the character or source of the payment is not known.
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(c) * * * Paragraph (a)(4)(i) of this section applies to payments made on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register . A withholding agent may, however, rely on the rules in paragraph (a)(4)(i) of this section (together with the rules in § 1.1441-2(d)(4)), for all deemed distributions (as defined in § 1.305-1(d)(7)) or deemed payments (as defined in § 1.861-3(a)(6)) that are withholdable payments occurring on or after January 1, 2016, until the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register .