Service Clarifies and Eases Backup Withholding Regs

 CC:IT&A:2 IA-68-90                                                                                       [4830-01]

 ACTION: Temporary regulations.

 SUMMARY: This document contains amendments to section 35a.3406-1 of the Temporary Income Tax Regulations under section 3406 of the Internal Revenue Code of 1986 (the "Code"). The amendments liberalize certain rules concerning the requirement for payors to backup withhold under section 3406(a)(1)(B) of the Code on certain reportable payments due to notification of an incorrect taxpayer identification number. These amendments affect payors, brokers, and payees of certain reportable payments and provide guidance necessary to comply with the law. The substance of section 35a.3406-1 of the regulations, as amended by this document, is included in the proposed regulations under section 3406 of the Code set forth in the notice of proposed rulemaking in the Proposed Rules section of this issue of the Federal Register.

 EFFECTIVE DATE: These amendments are effective on and after January 1, 1989.

 FOR FURTHER INFORMATION CONTACT: Renay France (202-377-9344, not a toll-free number).

SUPPLEMENTARY INFORMATION:

PAPERWORK REDUCTION ACT

This regulation is being issued without prior notice and public procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). The collection(s) of information contained in this regulation have been reviewed and approved by the Office of Management and Budget (OMB) under control number 1545-0969.

 The estimated average annual burden per respondent/ recordkeeper, depending on individual circumstances, is .25 hours. These estimates are an approximation of the average time expected to be necessary for a collection of information. They are based on such information as is available to the Internal Revenue Service, Individual respondents/recordkeepers may require greater or less time, depending on their particular circumstances.

 For further information concerning the collection of information, and where to submit comments on this collection of information, the accuracy of the estimated burden, and suggestions for reducing this burden, please refer to the preamble of the notice of proposed rulemaking in the Proposed Rules section of this issue of the Federal Register.

BACKGROUND

 This document contains amendments to Part 35a of Title 26 of the Code of Federal Regulations ("CFR"). The amendments provide guidance relating to the requirement under section 3406(a)(1)(B) of the Code that a payor backup withhold 20 percent from reportable payments due to an incorrect taxpayer identification number. This provision was added to the Code by section 104 of the Interest and Dividend Tax Compliance Act of 1983 (Pub. L. 98-67, 97 Stat. 369, 371). On November 23, 1987, the Internal Revenue Service published in the Federal Register temporary regulations (26 CFR Part 35a.3406-1, T.D. 8163, 52 FR 44861) concerning the requirement to backup withhold under section 3406(a)(1)(B). Amendments to these temporary regulations were published in the Federal Register on April 11, 1989 (T.D. 8248, 54 FR 14341).

 This issue of the Federal Register contains a notice of proposed rulemaking containing proposed regulations that, in large measure, would reorganize and restate in traditional regulation form various temporary regulations issued under section 3406. The substance of section 35a.3406-1, as amended by this Treasury decision, is included in such proposed regulations. Accordingly, the notice of proposed rulemaking provides an opportunity for the public to comment on all of the amendments made by this document.

EXPLANATION OF PROVISIONS

OVERVIEW OF THE LAW PRIOR TO THE AMENDMENTS MADE BY THIS TREASURY DECISION.

 Section 3406(a)(1)(B) of the Code requires a payor to institute backup withholding at a rate of 20 percent on any reportable payment to a payee if the service or a broker notifies the payor that the taxpayer identification number ("TIN") provided by the payee is incorrect. After a payor receives a "B" notice from the Service or a broker, (i) the payor must promptly furnish a copy to the payee, (ii) the payor must commence backup withholding on reportable payments no later than the 30th day after receipt of the "B" notice, and (iii) the payee may prevent backup withholding from commencing or terminate backup withholding, as the case may be, by furnishing the payor with a name/TIN combination in the appropriate manner. Section 3406(e)(2), (e)(5), and (h)(8). If the payor receives two "B" notices for the payee within any three-year period, the payee may prevent backup withholding from commencing or terminate backup withholding, as the case may be, only by obtaining a notice from the service that a correct name/TIN combination has been provided (the "2/3 rule"). Section 3406(h)(2).

 Pursuant to the "B" notice temporary regulations, an incorrect TIN exists if the name/TIN combination provided on an information return does not match a name/TIN combination in the records of the Service or the Social Security Administration (the "match requirement"). Backup withholding applies to all reportable payments to accounts of the payee that have the same incorrect name/TIN combination as the one contained on the "B" notice and that the payor can locate using reasonable care (the "reasonable care requirement"). Section 35a.3406-1(b)(3) and (5).

 The "B" notice temporary regulations require that a payor send a notice to the payee within 5 business days of having received the "B" notice (the "5-day requirement"). Section 35a.3406-1(c)(2). However, the preamble to the April 11, 19S9 amendments to the "B" notice temporary regulations states that the Service will mail "B" notices 2 to 3 weeks in advance of the date that they will be considered to be effective. 54 FR 14342.

 The "B" notice temporary regulations also provide, in part, that, with respect to accounts of the payee identified by the payor as having the same name/TIN combination, the payor must withhold 20 percent of either (i) withdrawals made after 7 business days following the payor's receipt of the "B" notice (to the extent of reportable payments made since such receipt) or (ii) reportable payments made after the 7-day period ("the 7-day requirement"). Section 35a.3406-1 (d).

 In addition, the "B" notice temporary regulations apply the 2/3 rule on a payee basis -- that is, they require a payor to identify and backup withhold on any account of a payee with the incorrect TIN and for whom the payor has received two "B" notices. Section 35a.3406-1(f).

THE AMENDMENTS TO THE "B" NOTICE TEMPORARY REGULATIONS MADE BY THIS TREASURY DECISION.

 Comments on the "B" notice temporary regulations have primarily focused on the match requirement, the reasonable care requirement, the 5-day requirement, the 7-day requirement, and the application of the 2/3 rule. The amendments contained in this Treasury decision are intended to address these concerns. The Service recognizes, however, that further changes in these and other areas of the "B" notice temporary regulations may be appropriate. Accordingly, the substance of the "B" notice temporary regulations, as amended by this Treasury decision, is included in the proposed regulations in the notice of proposed rulemaking under section 3406 of the Code in the Proposed Rules section of this issue of the Federal Register. This will allow persons to comment on areas where further changes might be appropriate.

 THE MATCH REQUIREMENT AND CERTAIN MULTI-NAME FIDUCIARY AND NOMINEE ACCOUNTS. Certain payors have informed the Service that they are likely to receive substantial numbers of "B" notices with respect to accounts maintained by fiduciaries or nominees even though the proper TIN for the ultimate taxpayer has been provided. These payors indicate that this may result, for example, because the Service's processing system does not read the full registration on certain multi-name fiduciary accounts (i.e., it reads only the first 80 characters of any registration) or because only the name of the fiduciary or nominee and the TIN of the beneficial owner are listed on the account. Accordingly, the "B" notice temporary regulations are amended to provide that, until final regulations are issued with respect to this issue, backup withholding under section 3406(a)(1)(B) will not apply to accounts with respect to which at least one person named in the registration is identified as acting in the capacity as nominee or as administrator, conservator, custodian, receiver, tutor, curator, committee, executor, guardian, trustee, or other fiduciary capacity recognized under governing law. Prior to the issuance of final regulations on this issue, for purposes of section 3406(a)(1)(B), payors are requested, but not required, to send copies of the "B" notices (or an acceptable substitute therefor) to the payees of such fiduciary and nominee accounts. The Service invites comments from payors on how fiduciary and nominee accounts can be formatted on information returns so that the correct name/TIN combination is identified.

 Notwithstanding the exemption from backup withholding provided for fiduciary and nominee accounts described above, payors continue to be required to file information returns for reportable payments made to such accounts and to be subject to the penalty under section 6721 of the Code for providing an incorrect TIN on such an information return. However, the fact that a payor sends a copy of the "B" notice (or an acceptable substitute therefor) and other prescribed information to the payee of a fiduciary or nominee account exempted from backup withholding will be considered strong evidence of (but not a requirement for) qualification for the reasonable cause exception to the penalty under section 6721 for information returns filed subsequent to receipt of the "B" notice.

 THE MATCH REQUIREMENT AND LEGAL IMPEDIMENTS TO CORRECTING A NAME OR TIN ON AN ACCOUNT. Some payors have informed the Service that there may be situations in which there are legal impediments to correcting a name or TIN on an account. For example, state law may prohibit a payor from changing the name on a negotiable instrument without proper authorization from the holder of the instrument. The Service requests comments on how to accommodate these situations.

 THE REASONABLE CARE REQUIREMENT. Certain payors have requested a less costly and time-consuming procedure for determining accounts of the payee that are potentially subject to backup withholding. Accordingly, the "B" notice temporary regulations are amended to provide that, where the "B" notice contains an account number or designation, backup withholding applies only to the account or accounts corresponding to that number or designation and containing the incorrect name/TIN combination. In a case where the "B" notice does not contain the account number or designation (because no account number or designation was provided on the related information return), backup withholding applies to all reportable payments made to accounts of the payee with the incorrect name/TIN combination that the payor can locate with reasonable care.

 THE 5-DAY REQUIREMENT. Several payors have informed the Service that, in a substantial number of cases, they will be unable to comply with the 5-day requirement even where the Service mails the "B" notices by 2 to 3 weeks in advance of their effective date because of the many tasks required of payors after receipt of "B" notices. However, lengthening the period allowed for a payor to notify a payee decreases day-for-day the period allowed for the payee to provide a certified TIN to the payor and prevent backup withholding from starting. The Service believes that 15 business days should serve the interests of both payors and payees. Therefore, the "B" notice temporary regulations are amended to provide that the period in which payors must notify payees of their incorrect TINs for purposes of backup withholding under section 3406(a)(1)(B) of the Code is extended from 5 to 15 business days.

 THE 7-DAY REQUIREMENT. The Service is concerned that the 7-day requirement may have the effect of eliminating any chance that a payee could provide a new name/TIN combination (or correct an error) prior to the payor's commencing backup withholding. Accordingly, the 7-day requirement is eliminated. Payors are required to commence backup withholding only after the close of 30 business days following receipt of the "B" notice, although payors may still elect to impose backup withholding at any time after receipt of the notice. The Service will consider other enforcement measures, rather than requiring backup withholding on withdrawals, in collecting the appropriate tax from payees who withdraw funds during the 30-day grace period.

 THE 2/3 RULE. Several payors have indicated that it is not feasible for them to apply the 2/3 rule on a payee basis. This requires them over time to correlate a payee with all accounts of the payee whether or not they have the same name/TIN combination as the one indicated on a "B" notice. This is especially difficult where the payor does not have a direct relationship with the payee. Accordingly, the 2/3 rule is amended to apply on an account, rather than a payee, basis. The 2/3 rule thus applies only where a payor receives a "B" notice twice within 3 calendar years with respect to the same account.

CONCLUDING COMMENTS

 The amendments made by this Treasury decision are effective on and after January 1, 1989. Thus, a payor is only required to notify payees and backup withhold on payee accounts as required by these regulations if the payor receives a notice of an incorrect taxpayer identification number from the Internal Revenue Service on or after January 1, 1990. In this connection payors may notify payees by sending an acceptable substitute of the notice set forth in the appendix to section 35a.3406-1. For this purpose, the notice set forth in the Federal Register on November 23, 1987 (52 FR 44871), or such notice as amended on April 11, 1989 (54 FR 14345) or an acceptable substitute of either will satisfy the requirement that the payor send a "B" notice to a payee.

SPECIAL ANALYSES

 These rules are not major rules as defined in Executive Order 12291 because the economic or other consequences are a direct result of a statute. Therefore, a Regulatory Impact Analysis is not required. It has also been determined that section 553(b) of the Administrative Procedures Act (5 U.S.C. Chapter 5) and the Regulatory Flexibility Act (5 U.S.C. Chapter 6) do not apply to these regulations, and, therefore, a final Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, these regulations will be submitted to the Administrator of the Small Business Administration for comment on their impact on small businesses.

DRAFTING INFORMATION

 The principal author of these regulations is Renay France of the Office of the Assistant Chief Counsel (Income Tax and Accounting), Internal Revenue Service. However, other personnel from the Internal Revenue Service and the Treasury Department participated in their development.

LIST OF SUBJECTS IN 26 CFR PART 35a

 Employment taxes, Income taxes, Backup withholding, Interest and Dividend Tax Compliance Act of 1983.

Treasury Decision 8309

ADOPTION OF AMENDMENTS TO THE REGULATIONS

Accordingly, 26 CFR Part 35a is amended as follows:

Part 35a -- TEMPORARY EMPLOYMENT TAX REGULATIONS UNDER THE INTEREST AND DIVIDEND TAX COMPLIANCE ACT OF 1983

Par. 1. The authority citation for Part 35a is amended by adding the following citation:

Authority: 26 U.S.C. 7805 * * * section 35a.3406-1 also issued under 26 U.S.C. 3406(a), (b), (e), (g), (h), and (i); 26 U.S.C. 6109; 26 U.S.C. 6676; and 26 U.S.C. 6721.

SECTION 35a.3406-1 [Amended]

Par. 2. Section 35a.3406-1 is amended as follows:

1. Paragraph (a)(1) is amended by removing the last two sentences and adding the following new sentence in their place: "See section 6721 for the penalty that may be imposed on a payor for providing an incorrect taxpayer identification number on an information return filed with the Internal Revenue Service unless there is reasonable cause for the error.".

2. Paragraph (b)(2) is amended by removing the last sentence of the concluding text and adding the following sentence in its place: "See paragraph (b)(5)(ii) of this section for accounts of the payee with respect to which the broker is required to notify a payor under this paragraph (b)(2).".

3. Paragraph (b)(5)(i)(B), second sentence, is amended by removing the words "name, taxpayer identification number, and the account number" and adding in their place the following words: "name and taxpayer identification number".

4. The concluding text following paragraph (c)(1)(ii) is amended by removing the words "Federal Register on November 23, 1957 (52 FR 44571)" in the second and third sentences and adding in their place the words "appendix to this section".

5. Paragraph (c)(2)(i) is amended by removing the word "5" and by adding in its place the word "15".

6. Paragraph (c)(3) introductory text, second sentence, is amended by removing the words "Federal Register on November 23, 1987 (52 FR 44871)" and adding in their place the words "appendix to this section".

7. Paragraph (c)(3)(vii) is amended by adding the word "and" at the end thereof.

8. Paragraph (c)(3)(viii) is amended by removing the words "; and" at the end thereof and adding a period in their place.

9. Paragraph (c)(3)(ix) is removed.

10. Paragraph (d)(2)(i) is amended by removing the words "paragraph (d)(1)(i)" and adding the words "paragraph (d)(1)" in their place in the first sentence, and by removing the last sentence.

11. Paragraph (f)(2)(ii) is amended by removing the word "an" and by adding in its place the word "the" immediately before the words "account with the payor;".

12. Paragraph (f)(2)(iii) is amended by removing the words "to existing accounts with the payor;" and by adding in their place the words "to the account;".

13. Paragraph (f)(4)(i) is amended by removing the words "paragraph (f)(3)(i)" and inserting in their place the words "paragraph (f)(3)" and by removing the last sentence.

14. Paragraph (g) is amended by adding the words "with respect to the same account" immediately after the words "provided an incorrect taxpayer identification number".

15. The first paragraph of the Appendix to section 35a.3406-1 is amended by removing the words "notice published in the Federal Register on November 23, 1987 (52 FR 44871) or to the".

16. The second paragraph of the "Notice of Backup Withholding" in the Appendix to section 35a.3406-1 is amended by removing the word "6676" and adding in its place the word 6723".

17. The text in the "Notice of Backup Withholding" in the Appendix to section 35a.3406-1 entitled "Remember" is amended by removing the last sentence in the first paragraph.

18. Paragraph (a)(3)(x) is added; and paragraphs (b)(3), (b)(5)(i) introductory text; and (b)(5)(ii); (c)(3)(vi); (d)(1); (f)(1) introductory text, (f)(1)(i), (f)(1)(ii), (f)(1)(iii), (f)(2)(iv), and (f)(3); and (j) are revised. The added and revised provisions read as follows:

SECTION 35A.3406-1 IMPOSITION OF BACKUP WITHHOLDING DUE TO NOTIFICATION OF AN INCORRECT TAXPAYER IDENTIFICATION NUMBER.

(a) REQUIREMENT THAT A PAYOR BACKUP WITHHOLD DUE TO NOTIFICATION OF AN INCORRECT TAXPAYER IDENTIFICATION NUMBER. * * *

* * * * *

(3) REPORTABLE PAYMENTS EXCLUDED FROM BACKUP WITHHOLDING. * * *

* * * * *

(x) PAYMENTS TO CERTAIN FIDUCIARY AND NOMINEE ACCOUNTS. Payments to a fiduciary or nominee account. For purposes of this paragraph, a fiduciary or nominee account means an account with respect to which at least one person named in the registration is identified as acting in the capacity as nominee or of administrator, conservator, custodian, receiver, tutor, curator, committee, executor, guardian, trustee, or other fiduciary capacity recognized under governing law.

* * * * *

(b) NOTICE REGARDING AN INCORRECT TAXPAYER IDENTIFICATION NUMBER. * * *

(3) ACCOUNTS SUBJECT TO BACKUP WITHHOLDING. After receiving notice from the Internal Revenue Service or from a broker, as provided in paragraph (b)(1) and (2) of this section, the payor is required to notify the payee in accordance with paragraph (c) of this section and to institute backup withholding as prescribed in paragraph (d) of this section on all reportable payments subject to backup withholding that are made to the account or accounts of the payee containing the incorrect taxpayer identification number. See paragraph (f) of this section for the rules that apply when a payor has received two notifications of an incorrect taxpayer identification number with respect to an account of the payee from the Internal Revenue Service or a broker within 3 calendar years. See paragraph (b)(5) of this section for the determination of the account or accounts of the payee containing the incorrect taxpayer identification number.

* * * * *

(5) DETERMINATION OF THE ACCOUNT OR ACCOUNTS OF THE PAYEE CONTAINING THE INCORRECT TAXPAYER IDENTIFICATION NUMBER -- (i) PAYORS. If an account number or designation is provided in the notice received under paragraph (b)(1) or (2) of this section, the payor need only determine whether the account or accounts corresponding to that number or designation contain the same name and incorrect taxpayer identification number provided in the notice. If no account number or designation is provided in the notice received under paragraph (b)(1) or (2) of this section, the payor must locate, using reasonable care, all accounts of the payee containing the same name and incorrect taxpayer identification number provided in the notice. A payor who satisfies the following two-part facts and circumstances test will be considered to have exercised reasonable care. * * *

* * * * *

(ii) BROKERS. Brokers are required to use the information and follow the procedures described in paragraph (b)(5)(i) of this section to locate accounts of the payee with respect to which a broker is required to notify a payor pursuant to paragraph (b)(2) of this section.

(c) NOTICE FROM PAYORS OF BACKUP WITHHOLDING DUE TO AN INCORRECT TAXPAYER IDENTIFICATION NUMBER. * * *

* * * * *

(3) REQUIREMENTS OF SUBSTITUTE NOTICE TO THE PAYEE. * * *

* * * * *

(vi) Advises the payee that as a result of providing an incorrect taxpayer identification number, the payor is required under section 3406(a)(1)(B) of the Internal Revenue Code to begin backup withholding 20 percent of the reportable payments made to the account of the payee no later than after the close of the day 30 business days after the date that the payor is notified of the incorrect taxpayer identification number by the Internal Revenue Service or a broker if the payor has not received the required Form W-9 (or an acceptable substitute form) as described in paragraph (e) of this section;

* * * * *

(d) PERIOD DURING WHICH BACKUP WITHHOLDING IS REQUIRED DUE TO NOTIFICATION OF AN INCORRECT TAXPAYER IDENTIFICATION NUMBER -- (1) IN GENERAL. Except as provided in paragraph (d)(2) of this section, upon receiving a notice described in paragraph (b)(1) or (2) of this section, the payor must impose backup withholding on all reportable payments made to the account of the payee that are subject to backup withholding after the close of the 30th business day after the date the payor receives the notice described in paragraph (b)(1) or (2) of this section and on or before the close of the 30th calendar day after the day the payor receives from the payee the certified Form W- 9 (or acceptable substitute form) as described in paragraph (e) of this section.

(f) NOTIFICATION OF TWO INCORRECT TAXPAYER IDENTIFICATION NUMBERS WITHIN A 3-YEAR PERIOD -- (1) IN GENERAL. If a payor receives a notification as described in paragraph (b)(1) or (2) of this section twice within 3 calendar years, and in each case the payor pursuant to paragraph (b)(5) of this section identifies the same account as containing the incorrect taxpayer identification number, then the payor shall --

(i) Disregard any future certifications (described in paragraph (e) of this section) furnished by the payee with respect to the account;

(ii) Send the notice described in paragraph (f)(2) of this section to the payee (and not the notice required under paragraph (c) of this section) within 15 business days after the date that the payor receives the second notice described in this paragraph (f), and

(iii) Impose backup withholding on the account containing the incorrect taxpayer identification number for the period described in paragraph (f)(3) of this section.

* * * * *

(2) NOTICE TO PAYEE WHO HAS PROVIDED TWO INCORRECT TAXPAYER IDENTIFICATION NUMBERS WITHIN 3 YEARS. * * *

* * * * *

(iv) As a result of providing an incorrect taxpayer identification number, the payor is required under section 3406(a)(1)(B) to begin backup withholding 20 percent of reportable payments made to the account of the payee no later than after the close of the day 30 business days after the date that the payor is notified of the incorrect taxpayer identification number if the Internal Revenue Service has not notified the payor that the payee provided a correct taxpayer identification number to the Internal Revenue Service as described in paragraph (h) of this section; and

* * * * *

(3) PERIOD DURING WHICH BACKUP WITHHOLDING IS REQUIRED DUE TO A SECOND NOTIFICATION OF AN INCORRECT NUMBER WITHIN 3 YEARS. Upon receiving the second notice of an incorrect taxpayer identification number from the Internal Revenue Service or a broker as described in paragraph (f)(1) of this section, the payor must backup withhold on all reportable payments subject to backup withholding made to the account of the payee after the close of the 30th business day after the day on which the payor receives a notice described in paragraph (b)(1) or (2) of this section and on or before the close of the 30th calendar day after the payor receives the notification from the Internal Revenue Service as described in paragraph (h) of this section.

* * * * *

(j) EXAMPLES. The application of the provisions of this section may be illustrated by the following examples:

EXAMPLE (1). D opened an account with Bank O prior to 1984 and furnished a taxpayer identification number to O at the time he opened the account. O is open for business Monday through Friday. O pays interest on the account at the end of each calendar month and the account is a pre-1984 account as described in A-34 of section 35a. 9999-1 and A-20 of section 35a.9999-3. On October 1, 1990, the Internal Revenue Service notifies Bank 0 that the taxpayer identification number provided by D is incorrect. O timely sends the notice information to D as required in paragraph (c)(1) of this section. O does not receive a certified Form W-9 or an acceptable substitute form (hereinafter "certification") from D as described in paragraph (e) of this section. O is required to backup withhold 20 percent of all reportable payments made after November 14, 1990 (which is 30 business days after the date the Internal Revenue Service notified O). Therefore, O is not required to backup withhold on the reportable payment made on October 31, 1990, but is required to backup withhold on the reportable payment made on November 30, 1990. O is required to continue to backup withhold under section 3406(a)(1)(B) until O receives the certification described in paragraph (e) of this section from D.

EXAMPLE (2). Assume the same facts as in Example (1) except that D furnishes a new taxpayer identification number to O on November 1, 1990, but does not certify, under penalties of perjury, that it is his correct taxpayer identification number as required in paragraph (e) of this section. Even though the account is a pre-1984 account, O is required to withhold 20 percent of all reportable payments made after November 14, 1990 (which is 30 business days after the date the Internal Revenue Service notified 0), and before the date O receives the certification described in paragraph (e) of this section from D.

EXAMPLE (3). Assume the same facts as in Example (2) except that D provides O with the certification described in paragraph (e) of this section on November 20, 1990. D elects pursuant to paragraph (d)(2)(ii) of this section to treat the certification as received on November 20, 1990. Even though D did not provide the certification to O within 30 business days after the Internal Revenue Service notified O that D provided an incorrect taxpayer identification number, O is not required to backup withhold under section 3406(a)(1)(B) because O did not make any reportable payment to D after 30 business days after notification of an incorrect taxpayer identification number and before O received D's certification in the manner required in paragraph (e) of this section. Pursuant to section 3406(e)(5)(B), O may elect to treat the certification as having been received at any time within 30 calendar days after it is provided by D.

EXAMPLE (4). Individual F has two post-1983 accounts with Bank R that pay reportable interest: a savings account and a money market account. The money market account was opened in 1986, and the savings account was opened on February 1, 1991. R treats each of these accounts as a separate account with the Bank. F provided R with the certifications as described under A-32 of section 35a.9999-1 at the time each account was opened. On October 1, 1990, the Internal Revenue Service notified R pursuant to paragraph (b)(1) of this section that F furnished an incorrect taxpayer identification number with respect to the money market account. R timely sends F the notice required under paragraph (b)(1) of this section and receives the certification required under paragraph (e) of this section from F on November 1, 1990. On October 1, 1991, the Internal Revenue Service notifies R that F furnished an incorrect taxpayer identification number with respect to the money market account. Further, R determines from its business records that two notifications of an incorrect taxpayer identification number have been received with respect to the money market account within 3 calendar years. R must send F the notice required under paragraph (f)(2) of this section and must commence backup withholding on reportable interest paid on the money market account pursuant to paragraph (f)(3) of this section after November 14, 1991 (which is 30 business days after R received the second notice). R must continue to backup withhold on the money market account until R receives from the payee a copy of the notice that was provided to the payee by the Internal Revenue Service as described in paragraph (h) of this section. R is not required to backup withhold on the savings account until it receives notice under paragraph (b)(1) or (2) of this section with respect to the savings account.

* * * * *

There is a need for immediate guidance with respect to the amendments made in this Treasury decision. For this reason, it is found impracticable and contrary to the public interest to issue this Treasury decision with notice and public procedure under subsection (b) of section 553 of Title 5 of the United States Code or subject to the effective date limitation of subsection (d) of that section.