# Prop. Treas. Reg. § 1.871-14: Rules relating to repeal of tax on interest of nonresident alien individuals and foreign corporations received from certain portfolio debt investments.

Proposed regulation, not in force. REG-125374-16, 82 FR 43720, published 2017-09-19 <https://www.federalregister.gov/documents/2017/09/19/2017-19753/guidance-on-the-definition-of-registered-form>. Interprets 26 U.S.C. § 871.

Par. 7. Section 1.871-14 is amended by: 1. Revising the heading for paragraph (c). 2. Revising paragraph (c)(1)(i). 3. Revising the heading for paragraph (d). 4. Revising paragraphs (d)(1) and (2). 5. Adding paragraphs (j)(4) and (5). The revisions and additions read as follows:

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(c) Obligations in registered form —(1) In general —(i) Registered form. For purposes of this section, the rules of § 1.163-5(b) apply to determine when an obligation is in registered form.

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(d) Application of repeal of 30-percent withholding to pass-through certificates or participation interests —(1) In general —(i) Pass-through certificates. Interest received on a pass-through certificate (as defined in § 1.163-5(a)(3)(i)(B)) qualifies as portfolio interest under section 871(h)(2) or 881(c)(2) if the interest satisfies the conditions described in paragraph (c)(1)(ii) of this section or the conditions described in paragraph (e) of this section, without regard to whether any obligation held by the grantor trust, or similar fund, to which the pass-through certificate relates is described in paragraph (c)(1)(ii) or (e) of this section. For purposes of this paragraph (d)(1)(i), a similar fund includes an entity that, under §§ 301.7701-1 through 301.7701-3 of this chapter, is disregarded as an entity separate from its owner or classified as a partnership for federal tax purposes, without regard to the fund has the power to vary the assets in the fund or the sequence of payments made to holders. In addition, for purposes of this paragraph (d)(1)(i), a similar fund does not include a business entity that is classified as a corporation under § 301.7701-2 of this chapter.

(ii) Participation interests. Interest received on a participation interest described in § 1.163-5(a)(3)(ii) qualifies as portfolio interest under section 871(h)(2) or 881(c)(2) if the interest satisfies the conditions described in paragraph (c)(1)(ii) of this section or the conditions described in paragraph (e) of this section, without regard to whether the obligation to which the participation interest relates is described in paragraph (c)(1)(ii) or (e) of this section.

(2) Interest in REMICs. Interest received on a regular or residual interest in a REMIC, as defined in sections 860D and 860G and the regulations thereunder, qualifies as portfolio interest under section 871(h)(2) or 881(c)(2) if the interest satisfies the conditions described in paragraph (c)(1)(ii) of this section or the conditions described in paragraph (e) of this section. For purposes of paragraphs (c)(1)(ii) and (e) of this section, interest  on a regular interest in a REMIC is not considered interest on any mortgage obligations held by the REMIC. The rule in the preceding sentence, however, applies only to payments made to the holder of the regular interest in the REMIC from the REMIC and does not apply to payments made to the REMIC. For purposes of paragraphs (c)(1)(ii) and (e) of this section, interest on a residual interest in a REMIC is considered to be interest on or with respect to the obligations held by the REMIC, and not on or with respect to the residual interest.

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(4) Registered form. Paragraph (c)(1)(i) of this section applies to obligations issued after March 18, 2012. For the rules that apply to obligations issued on or before March 18, 2012, see § 1.871-14 as contained in 26 CFR part 1, revised as of the date of the most recent annual revision.

(5) Pass-through certificates, participation interests, and interests in REMICs. Paragraph (d) of this section applies to pass-through certificates, participation interests, or interests in REMICs issued after the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register .