
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC1445]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
    CHAPTER 3--WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND FOREIGN 
                              CORPORATIONS
 
        Subchapter A--Nonresident Aliens and Foreign Corporations
 
Sec. 1445. Withholding of tax on dispositions of United States 
        real property interests
        

(a) General rule

    Except as otherwise provided in this section, in the case of any 
disposition of a United States real property interest (as defined in 
section 897(c)) by a foreign person, the transferee shall be required to 
deduct and withhold a tax equal to 10 percent of the amount realized on 
the disposition.

(b) Exemptions

                           (1) In general

        No person shall be required to deduct and withhold any amount 
    under subsection (a) with respect to a disposition if paragraph (2), 
    (3), (4), (5), or (6) applies to the transaction.

            (2) Transferor furnishes nonforeign affidavit

        Except as provided in paragraph (7), this paragraph applies to 
    the disposition if the transferor furnishes to the transferee an 
    affidavit by the transferor stating, under penalty of perjury, the 
    transferor's United States taxpayer identification number and that 
    the transferor is not a foreign person.

       (3) Nonpublicly traded domestic corporation furnishes 
             affidavit that interests in corporation not United 
                       States real property interests

        Except as provided in paragraph (7), this paragraph applies in 
    the case of a disposition of any interest in any domestic 
    corporation if the domestic corporation furnishes to the transferee 
    an affidavit by the domestic corporation stating, under penalty of 
    perjury, that--
            (A) the domestic corporation is not and has not been a 
        United States real property holding corporation (as defined in 
        section 897(c)(2)) during the applicable period specified in 
        section 897(c)(1)(A)(ii), or
            (B) as of the date of the disposition, interests in such 
        corporation are not United States real property interests by 
        reason of section 897(c)(1)(B).

            (4) Transferee receives qualifying statement

        (A) In general

            This paragraph applies to the disposition if the transferee 
        receives a qualifying statement at such time, in such manner, 
        and subject to such terms and conditions as the Secretary may by 
        regulations prescribe.

        (B) Qualifying statement

            For purposes of subparagraph (A), the term ``qualifying 
        statement'' means a statement by the Secretary that--
                (i) the transferor either--
                    (I) has reached agreement with the Secretary (or 
                such agreement has been reached by the transferee) for 
                the payment of any tax imposed by section 871(b)(1) or 
                882(a)(1) on any gain recognized by the transferor on 
                the disposition of the United States real property 
                interest, or
                    (II) is exempt from any tax imposed by section 
                871(b)(1) or 882(a)(1) on any gain recognized by the 
                transferor on the disposition of the United States real 
                property interest, and

                (ii) the transferor or transferee has satisfied any 
            transferor's unsatisfied withholding liability or has 
            provided adequate security to cover such liability.

    (5) Residence where amount realized does not exceed $300,000

        This paragraph applies to the disposition if--
            (A) the property is acquired by the transferee for use by 
        him as a residence, and
            (B) the amount realized for the property does not exceed 
        $300,000.

     (6) Stock regularly traded on established securities market

        This paragraph applies if the disposition is of a share of a 
    class of stock that is regularly traded on an established securities 
    market.

            (7) Special rules for paragraphs (2) and (3)

        Paragraph (2) or (3) (as the case may be) shall not apply to any 
    disposition--
            (A) if--
                (i) the transferee has actual knowledge that the 
            affidavit referred to in such paragraph is false, or
                (ii) the transferee receives a notice (as described in 
            subsection (d)) from a transferor's agent or a transferee's 
            agent that such affidavit is false, or

            (B) if the Secretary by regulations requires the transferee 
        to furnish a copy of such affidavit to the Secretary and the 
        transferee fails to furnish a copy of such affidavit to the 
        Secretary at such time and in such manner as required by such 
        regulations.

(c) Limitations on amount required to be withheld

        (1) Cannot exceed transferor's maximum tax liability

        (A) In general

            The amount required to be withheld under this section with 
        respect to any disposition shall not exceed the amount (if any) 
        determined under subparagraph (B) as the transferor's maximum 
        tax liability.

        (B) Request

            At the request of the transferor or transferee, the 
        Secretary shall determine, with respect to any disposition, the 
        transferor's maximum tax liability.

        (C) Refund of excess amounts withheld

            Subject to such terms and conditions as the Secretary may by 
        regulations prescribe, a transferor may seek and obtain a refund 
        of any amounts withheld under this section in excess of the 
        transferor's maximum tax liability.

       (2) Authority of Secretary to prescribe reduced amount

        At the request of the transferor or transferee, the Secretary 
    may prescribe a reduced amount to be withheld under this section if 
    the Secretary determines that to substitute such reduced amount will 
    not jeopardize the collection of the tax imposed by section 
    871(b)(1) or 882(a)(1).

                        (3) Procedural rules

        (A) Regulations

            Requests for--
                (i) qualifying statements under subsection (b)(4),
                (ii) determinations of transferor's maximum tax 
            liability under paragraph (1), and
                (iii) reductions under paragraph (2) in the amount 
            required to be withheld,

        shall be made at the time and manner, and shall include such 
        information, as the Secretary shall prescribe by regulations.

        (B) Requests to be handled within 90 days

            The Secretary shall take action with respect to any request 
        described in subparagraph (A) within 90 days after the Secretary 
        receives the request.

(d) Liability of transferor's agents or transferee's agents

         (1) Notice of false affidavit; foreign corporations

        If--
            (A) the transferor furnishes the transferee an affidavit 
        described in paragraph (2) of subsection (b) or a domestic 
        corporation furnishes the transferee an affidavit described in 
        paragraph (3) of subsection (b), and
            (B) in the case of--
                (i) any transferor's agent--
                    (I) such agent has actual knowledge that such 
                affidavit is false, or
                    (II) in the case of an affidavit described in 
                subsection (b)(2) furnished by a corporation, such 
                corporation is a foreign corporation, or

                (ii) any transferee's agent, such agent has actual 
            knowledge that such affidavit is false,

    such agent shall so notify the transferee at such time and in such 
    manner as the Secretary shall require by regulations.

                    (2) Failure to furnish notice

        (A) In general

            If any transferor's agent or transferee's agent is required 
        by paragraph (1) to furnish notice, but fails to furnish such 
        notice at such time or times and in such manner as may be 
        required by regulations, such agent shall have the same duty to 
        deduct and withhold that the transferee would have had if such 
        agent had complied with paragraph (1).

        (B) Liability limited to amount of compensation

            An agent's liability under subparagraph (A) shall be limited 
        to the amount of compensation the agent derives from the 
        transaction.

                       (3) Transferor's agent

        For purposes of this subsection, the term ``transferor's agent'' 
    means any person who represents the transferor--
            (A) in any negotiation with the transferee or any 
        transferee's agent related to the transaction, or
            (B) in settling the transaction.

                       (4) Transferee's agent

        For purposes of this subsection, the term ``transferee's agent'' 
    means any person who represents the transferee--
            (A) in any negotiation with the transferor or any 
        transferor's agent related to the transaction, or
            (B) in settling the transaction.

      (5) Settlement officer not treated as transferor's agent

        For purposes of this subsection, a person shall not be treated 
    as a transferor's agent or transferee's agent with respect to any 
    transaction merely because such person performs 1 or more of the 
    following acts:
            (A) The receipt and the disbursement of any portion of the 
        consideration for the transaction.
            (B) The recording of any document in connection with the 
        transaction.

(e) Special rules relating to distributions, etc., by corporations, 
        partnerships, trusts, or estates

       (1) Certain domestic partnerships, trusts, and estates

        In the case of any disposition of a United States real property 
    interest as defined in section 897(c) (other than a disposition 
    described in paragraph (4) or (5)) by a domestic partnership, 
    domestic trust, or domestic estate, such partnership, the trustee of 
    such trust, or the executor of such estate (as the case may be) 
    shall be required to deduct and withhold under subsection (a) a tax 
    equal to 35 percent (or, to the extent provided in regulations, 20 
    percent) of the gain realized to the extent such gain--
            (A) is allocable to a foreign person who is a partner or 
        beneficiary of such partnership, trust, or estate, or
            (B) is allocable to a portion of the trust treated as owned 
        by a foreign person under subpart E of part I of subchapter J.

          (2) Certain distributions by foreign corporations

        In the case of any distribution by a foreign corporation on 
    which gain is recognized under subsection (d) or (e) of section 897, 
    the foreign corporation shall deduct and withhold under subsection 
    (a) a tax equal to 35 percent of the amount of gain recognized on 
    such distribution under such subsection.

       (3) Distributions by certain domestic corporations to 
                            foreign shareholders

        If a domestic corporation which is or has been a United States 
    real property holding corporation (as defined in section 897(c)(2)) 
    during the applicable period specified in section 897(c)(1)(A)(ii) 
    distributes property to a foreign person in a transaction to which 
    section 302 or part II of subchapter C applies, such corporation 
    shall deduct and withhold under subsection (a) a tax equal to 10 
    percent of the amount realized by the foreign shareholder. The 
    preceding sentence shall not apply if, as of the date of the 
    distribution, interests in such corporation are not United States 
    real property interests by reason of section 897(c)(1)(B). Rules 
    similar to the rules of the preceding provisions of this paragraph 
    shall apply in the case of any distribution to which section 301 
    applies and which is not made out of the earnings and profits of 
    such a domestic corporation.

          (4) Taxable distributions by domestic or foreign 
                      partnerships, trusts, or estates

        A domestic or foreign partnership, the trustee of a domestic or 
    foreign trust, or the executor of a domestic or foreign estate shall 
    be required to deduct and withhold under subsection (a) a tax equal 
    to 10 percent of the fair market value (as of the time of the 
    taxable distribution) of any United States real property interest 
    distributed to a partner of the partnership or a beneficiary of the 
    trust or estate, as the case may be, who is a foreign person in a 
    transaction which would constitute a taxable distribution under the 
    regulations promulgated by the Secretary pursuant to section 897.

         (5) Rules relating to dispositions of interest in 
                      partnerships, trusts, or estates

        To the extent provided in regulations, the transferee of a 
    partnership interest or of a beneficial interest in a trust or 
    estate shall be required to deduct and withhold under subsection (a) 
    a tax equal to 10 percent of the amount realized on the disposition.

                           (6) Regulations

        The Secretary shall prescribe such regulations as may be 
    necessary to carry out the purposes of this subsection, including 
    regulations providing for exceptions from provisions of this 
    subsection and regulations for the application of this subsection in 
    the case of payments through 1 or more entities.

(f) Definitions

    For purposes of this section--

                           (1) Transferor

        The term ``transferor'' means the person disposing of the United 
    States real property interest.

                           (2) Transferee

        The term ``transferee'' means the person acquiring the United 
    States real property interest.

                         (3) Foreign person

        The term ``foreign person'' means any person other than a United 
    States person.

               (4) Transferor's maximum tax liability

        The term ``transferor's maximum tax liability'' means, with 
    respect to the disposition of any interest, the sum of--
            (A) the maximum amount which the Secretary determines could 
        be imposed as tax under section 871(b)(1) or 882(a)(1) by reason 
        of the disposition, plus
            (B) the amount the Secretary determines to be the 
        transferor's unsatisfied withholding liability with respect to 
        such interest.

         (5) Transferor's unsatisfied withholding liability

        The term ``transferor's unsatisfied withholding liability'' 
    means the withholding obligation imposed by this section on the 
    transferor's acquisition of the United States real property interest 
    or on the acquisition of a predecessor interest, to the extent such 
    obligation has not been satisfied.

(Added Pub. L. 98-369, div. A, title I, Sec. 129(a)(1), July 18, 1984, 
98 Stat. 655; amended Pub. L. 99-514, title III, Sec. 311(b)(4), title 
XVIII, Sec. 1810(f)(2)-(4)(A), (5), (6), (8), Oct. 22, 1986, 100 Stat. 
2219, 2827, 2828; Pub. L. 100-647, title I, Sec. 1003(b)(3), Nov. 10, 
1988, 102 Stat. 3384; Pub. L. 103-66, title XIII, Sec. 13221(c)(3), Aug. 
10, 1993, 107 Stat. 477; Pub. L. 104-188, title I, Sec. 1704(c)(1), Aug. 
20, 1996, 110 Stat. 1878; Pub. L. 105-34, title III, Sec. 311(c)(1), 
Aug. 5, 1997, 111 Stat. 835.)


                               Amendments

    1997--Subsec. (e)(1). Pub. L. 105-34 substituted ``20 percent'' for 
``28 percent'' in introductory provisions.
    1996--Subsec. (e)(3). Pub. L. 104-188 inserted at end ``Rules 
similar to the rules of the preceding provisions of this paragraph shall 
apply in the case of any distribution to which section 301 applies and 
which is not made out of the earnings and profits of such a domestic 
corporation.''
    1993--Subsec. (e)(1), (2). Pub. L. 103-66 substituted ``35 percent'' 
for ``34 percent''.
    1988--Subsec. (e)(1). Pub. L. 100-647 inserted ``(or, to the extent 
provided in regulations, 28 percent)'' after ``to 34 percent''.
    1986--Subsec. (b)(3). Pub. L. 99-514, Sec. 1810(f)(2), amended par. 
(3) generally, substituting ``interests in corporation not United States 
real property interests'' for ``it is not a United States real property 
holding corporation'' in heading, striking out the comma before ``if the 
domestic corporation'' in introductory provisions, inserting subpar. (A) 
designation and adding subpar. (B).
    Subsec. (d)(1)(A). Pub. L. 99-514, Sec. 1810(f)(3)(B), substituted 
``paragraph (2)'' for ``paragraph (2)(A)''.
    Subsec. (d)(1)(B)(i). Pub. L. 99-514, Sec. 1810(f)(3)(A), amended 
cl. (i) generally. Prior to amendment, cl. (i) read as follows: ``any 
transferor's agent, the transferor is a foreign corporation or such 
agent has actual knowledge that such affidavit is false, or''.
    Subsec. (e)(1). Pub. L. 99-514, Sec. 311(b)(4), substituted ``34 
percent'' for ``28 percent''.
    Pub. L. 99-514, Sec. 1810(f)(4), amended par. (1) generally. Prior 
to amendment, par. (1) read as follows: ``A domestic partnership, the 
trustee of a domestic trust, or the executor of a domestic estate shall 
be required to deduct and withhold under subsection (a) a tax equal to 
10 percent of any amount of which such partnership, trustee, or executor 
has custody which is--
        ``(A) attributable to the disposition of a United States real 
    property interest (as defined in section 897(c), other than a 
    disposition described in paragraph (4) or (5)), and
        ``(B) either--
            ``(i) includible in the distributive share of a partner of 
        the partnership who is a foreign person,
            ``(ii) includible in the income of a beneficiary of the 
        trust or estate who is a foreign person, or
            ``(iii) includible in the income of a foreign person under 
        the provisions of section 671.''
    Subsec. (e)(2). Pub. L. 99-514, Sec. 311(b)(4), substituted ``34 
percent'' for ``28 percent''.
    Subsec. (e)(3). Pub. L. 99-514, Sec. 1810(f)(5), inserted ``The 
preceding sentence shall not apply if, as of the date of the 
distribution, interests in such corporation are not United States real 
property interests by reason of section 897(c)(1)(B).''
    Subsec. (e)(4). Pub. L. 99-514, Sec. 1810(f)(6), substituted 
``section 897'' for ``section 897(g)''.
    Subsec. (e)(6). Pub. L. 99-514, Sec. 1810(f)(8), inserted ``and 
regulations for the application of this subsection in the case of 
payments through 1 or more entities''.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-34 applicable only to amounts paid after 
Aug. 5, 1997, see section 311(d)(2) of Pub. L. 105-34, set out as a note 
under section 1 of this title.


                    Effective Date of 1996 Amendment

    Section 1704(c)(2) of Pub. L. 104-188 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to 
distributions after the date of the enactment of this Act [Aug. 20, 
1996].''


                    Effective Date of 1988 Amendment

    Section 1003(b)(3) of Pub. L. 100-647 provided that the amendment 
made by that section is effective for taxable years beginning after Dec. 
31, 1987.


                    Effective Date of 1986 Amendment

    Amendment by section 311(b)(4) of Pub. L. 99-514 applicable to 
payments made after Dec. 31, 1986, see section 311(c) of Pub. L. 99-514, 
as amended, set out as a note under section 1201 of this title.
    Amendment by section 1810(f)(2), (3), (5), (6), (8) of Pub. L. 99-
514 effective, except as otherwise provided, as if included in the 
provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to 
which such amendment relates, see section 1881 of Pub. L. 99-514, set 
out as a note under section 48 of this title.
    Section 1810(f)(4)(B) of Pub. L. 99-514 provided that: ``The 
amendment made by subparagraph (A) [amending this section] shall apply 
to dispositions after the day 30 days after the date of the enactment of 
this Act [Oct. 22, 1986].''


                             Effective Date

    Section 129(c)(1) of Pub. L. 98-369 provided that: ``The amendment 
made by subsection (a) [enacting this section] shall apply to any 
disposition on or after January 1, 1985.''


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 897, 6039C of this title.
