SIFMA Requests Guidance on Electronically Accessed Tax Documents

SIFMA asked the IRS to provide guidance to allow withholding agents to validate tax documents, such as W-8BENs, that are electronically scanned from third-party document repositories.

Many investment managers of investment funds contract with third-party document repositories, such as Markit, to house tax documentation that the fund requests from new account holders. The fund uploads these forms electronically to the document repository and then authorizes specific investment banks and other withholding agents to access the documents on the document repository when a request is made for such documents. According to SIFMA, some withholding agents are comfortable with the idea that current FATCA regulations already permit this procedure, but many others have concluded that they cannot accept forms from document repositories until the IRS issues affirmative guidance that specifically addresses the requirements for making an electronic delivery via a document repository.

SIFMA noted that the timing of such guidance is urgent. Since January 1, 2015, withholding agents have been required under FATCA to document the FATCA status of new account holders upon their opening accounts. Moreover, under FATCA due diligence procedures, withholding agents must review the status of preexisting accounts and possibly obtain new documentation on such accounts within the next 16 months.

SIFMA proposes that the IRS issue an FAQ or other guidance confirming that a withholding agent may treat tax documents that are electronically delivered via a document repository as being "scanned and received electronically" within the meaning of Treasury Regulations section 1.1471-1(e)(4)(iv)(C). This procedure would apply only to W-8BENs and other tax documents that were filled out manually, signed by or on behalf of clients, and not completed through an electronic signature Form W-8 system.

See: SIFMA Comment Letter.