Extract from Hiring Incentives to Restore Employment Act, Feb 2010
Sec 501  p.68

‘‘(3) SEPARATE REQUIREMENTS FOR QUALIFIED INTERMEDIARIES.
In the case of a foreign financial institution which is treated as a qualified intermediary by the Secretary for purposes of section 1441 and the regulations issued thereunder, the requirements of this section shall be in addition to any reporting or other requirements imposed by the Secretary for purposes of such treatment."
 

Extracts from Qualified Intermediary Program Provides Some Assurance
That Taxes on Foreign Investors Are Withheld and Reported, but Can Be Improved,
GAO-08-99,  US Government Accountability Office, Dec 2007 (emphasis added)

p.10:   "Under the QI program, foreign financial institutions voluntarily sign an agreement to withhold and report the appropriate amount of tax on the U.S. source income they send to their offshore customers. This entails determining the kind and amount of their clients’ U.S. source income, determining whether clients are eligible for benefits (which is determined by the client’s national residency), and then calculating, withholding, and reporting appropriate amounts to IRS. When customers wish to claim treaty benefits or exemptions, they must also submit to a QI or other withholding agent an IRS Form W-8BEN, known as a withholding certificate, or other acceptable documentation. On the withholding certificate the customer provides various identifying information and completes applicable certifications, including that the customer is a resident of a country qualifying for treaty benefits or exemptions and that any limitations on benefits provisions in the treaty are met.10 To determine whether a client is eligible for treaty benefits and exemptions, the QIs accept documentation declaring clients’ residency, most often a self-certified Form W-8BEN, and verify that with other documents accepted as part of their account-opening procedures, such as passports or national health cards, in accordance with the “know your customer” rules already established by the jurisdiction in which they are located.
    If there is insufficient documentation to adequately determine the treaty status of an account owner, the QI, a nonqualified intermediary, or a U.S. financial institution must use the presumption rules¹¹ and apply backup withholding.Backup withholding is regulated separately, reported separately, and processed separately from routine NRA [non-resident alien] income and withholding. Furthermore, U.S. persons generally are taxed on their worldwide income. Their income and assets are withheld and reported separately and individually.

Income & Witholding Flows (without Backup Withholding!)

    One of the principal incentives for foreign financial institutions to become QIs is their ability to retain the anonymity of their client list. QIs may report customer income and withholding information for a group of similar recipients receiving similar benefits, known as “pooled reporting.” NQIs [non-QIs], on the other hand, must reveal the identity of their clients to upstream withholding agents through acceptable documentation in order for their customers to receive treaty benefits as well as interest and capital gains exemptions. Income owned by U.S. taxpayers held offshore may not be pooled and must be reported to IRS individually, either by the QI, NQI, or the last U.S. payor in a chain of payments. Payors of U.S. source income to U.S. taxpayers are not required to withhold from this income, but they must report the income on IRS Form 1099. U.S. taxpayers must report all of their current income on their income tax returns, including U.S. source and foreign source income, as well as ownership of foreign bank accounts and significant ownership in foreign corporations.12 QIs may opt out of primary withholding and reporting responsibilities for designated accounts — including those owned by U.S. persons—ceding those responsibilities and liabilities to financial institutions upstream in the chain of payments.
Eventually, the responsibilities and liabilities associated with these accounts may fall to the last payor within the United States (and therefore within the jurisdiction of IRS). "
 

Extracts from SELECTED ISSUES RELATING TO TAX COMPLIANCE WITH RESPECT TO
OFFSHORE ACCOUNTS AND ENTITIES, JCX-65-08, Joint Committee on Taxation, July 23, 2008

p.36:  " Since the adoption of the QI regime in 2001, 7,007 QI agreements have been signed.
There are currently 5,660 active QI agreements involving financial institutions in 60 countries.80
The QI program provides a significant benefit to foreign financial institutions—in particular, the
ability to obtain a reduced rate or exemption from U.S. withholding tax for their non-U.S.
customers without disclosing the identities of those customers to the IRS or competing financial
institutions.  At the same time, however, the contractual nature of the QI program provides the 
IRS with an important mechanism to enforce compliance with U.S. reporting and withholding 
rules.  For example, a foreign financial institution that is a QI is contractually required to
disclose the identity of its U.S. customers to the IRS, report the payment of certain amounts
to those customers and, in some circumstances, apply backup withholding.  These contractual 
requirements extend beyond the scope of the reporting and withholding that would otherwise
be required under applicable Treasury regulations.  Moreover, the fact that so many of the world’s
major financial institutions have entered into QI agreements places a non-QI financial institution
at a competitive disadvantage and creates a significant incentive for existing QIs to maintain
their QI status.  The IRS’s ability to terminate a QI agreement in the event of noncompliance,
thereby placing a financial institution at such a disadvantage, is a powerful tool for enforcing 
compliance and ensuring cooperation by a QI when instances of noncompliance are discovered."

p.5:   "Liechtenstein Global Trust Group 
The report describes practices employed by LGT, a leading Liechtenstein financial
institution that is alleged to have assisted U.S. clients in hiding assets offshore during the period
from 1998 to 2007.  According to the report, those practices included maintaining U.S. client
accounts that were not disclosed to U.S. tax authorities; advising U.S. clients to open accounts in
the name of Liechtenstein foundations to hide their beneficial ownership of the account assets;
advising clients on the use of complex offshore structures to hide ownership of assets outside of
Liechtenstein; and establishing “transfer corporations” to disguise asset transfers to and from
LGT accounts.  According to the report, LGT also advised clients on how to structure their
investments to avoid disclosure to the IRS under the QI program.9
    The LGT inquiry originated with an investigation by German authorities into the role of
LGT in facilitating the evasion of German tax.10  On February 25, 2008, the German authorities 
announced that they would share the information they had obtained in regard to LGT
with authorities in other countries whose residents had utilized Liechtenstein to engage in tax
evasion.11  On February 26, the IRS issued a news release stating that it was initiating
enforcement actions involving more than 100 U.S. taxpayers to ensure that they properly
reported income, and paid taxes, in connection with accounts in Liechtenstein.12  The news
release also stated that the tax authorities in Australia, Canada, France, Italy, New Zealand,
Sweden, the United Kingdom, and the United States were working together to address
the use of Liechtenstein accounts for tax evasion purposes."

p.6/7:   "UBS AG
The report also summarizes the PSI staff’s findings regarding the practices employed by
UBS, based in Switzerland and one of the world’s largest financial institutions, to facilitate tax
evasion by U.S. clients and avoidance of reporting requirements under the QI program. 17
According to the report, these practices included maintaining “undeclared” accounts in
Switzerland for an estimated 19,000 U.S. clients with billions of dollars in undisclosed assets.18
[18  In response to PSI inquiries, UBS estimated that it has about 20,000 accounts in Switzerland
for U.S. clients, of which roughly 1,000 are declared accounts and 19,000 are undeclared accounts that
had not been disclosed to the IRS.  UBS also estimated that those accounts contained assets with a
combined value of about $17.9 billion.  However, UBS was unable to specify the breakdown in assets
between the undeclared and declared accounts, except to note that the amount of assets in the undeclared
accounts was much greater than the amount in the declared accounts.  2008 PSI Report at 9.]
     UBS had voluntarily entered into a QI agreement with the IRS, effective January 1, 2001,
under which UBS agreed to identify and document any customers who held U.S. investments or
received U.S.-source income in accounts maintained with UBS.  Alternatively, if a U.S.
customer refused to be identified under the QI agreement, UBS was required to withhold U.S.
tax at a 28-percent rate on payments made to the customer, and to bar the customer from holding
U.S. investments.  The reporting or 28-percent withholding requirements also applied to income
from certain non-U.S. investments made as a result of contact with the U.S. client in the United
States.
    According to the report, many of UBS’s U.S. clients refused to be identified, to have
taxes withheld, or to sell their U.S. assets as required under the QI agreement.  To retain these
customers, UBS bankers assisted the customers in concealing their ownership of the assets held
in offshore accounts by helping to create nominee and sham entities.  These entities were set up
in various jurisdictions, including Switzerland, Liechtenstein, Panama, the British Virgin Islands,
and Hong Kong.  The UBS bankers and their U.S. customers then claimed that the offshore
accounts were owned by these nominee and sham entities and were not subject to the reporting
requirements imposed by the QI agreement.
    On July 1, 2008, a Federal district court in Florida granted the IRS permission to issue a
John Doe summons to UBS seeking the names of as many as 20,000 U.S. citizens who were
UBS customers for which reporting or withholding obligations may not have been met.
[see also: amicus curiae brief]"

Extracts from Technical Explanation Of The Revenue Provisions Contained In
The “Hiring Incentives To Restore Employment Act”Under Consideration By The Senate, 
JCX-4-10, Joint Committee on Taxation, Feb 23, 2010, p.22-36
p.29:     "If an IRS Form W-9 is not provided by a U.S. payee (other than payees exempt from
reporting), the payor is required to impose a backup withholding tax of 28 percent of the gross
amount of the payment.137   The backup withholding tax may be credited by the payee against
regular income tax liability.138   This combination of reporting and backup withholding is
designed to ensure that U.S. persons not exempt from reporting pay tax with respect to
investment income, either by providing the IRS with the information that it needs to audit
payment of the tax or, in the absence of such information, requiring collection of the tax on
payment."

p.30:     "The qualified intermediary program
    A QI is defined as a foreign financial institution or a foreign clearing organization, other
than a U.S. branch or U.S. office of such institution or organization, or a foreign branch of a U.S.
financial institution that has entered into a withholding and reporting agreement (a “QI
agreement”) with the IRS.140
    A foreign financial institution that becomes a QI is not required to forward beneficial
ownership information with respect to its customers to a U.S. financial institution or other
withholding agent of U.S.-source investment-type income to establish the customer’s eligibility
for an exemption from, or reduced rate of, U.S. withholding tax.141  Instead, the QI is permitted
to establish for itself the eligibility of its customers for an exemption or reduced rate, based on an
IRS Form W-8 or W-9, or other specified documentary evidence, and information as to residence
obtained under the know-your-customer rules to which the QI is subject in its home jurisdiction
as approved by the IRS or as specified in the QI agreement.142 The QI certifies as to eligibility 
on behalf of its customers, and provides withholding rate pool information to the U.S. "

p.32:     "If a U.S. non-exempt recipient has not provided an IRS Form W-9, the QI must disclose
the name, address, and taxpayer identification number (“TIN”) (if available) to the withholding
agent (and the withholding agent must apply backup withholding).  However, no such disclosure
is necessary if the QI is, under local law, prohibited from making the disclosure and the QI has
followed certain procedural requirements (including providing for backup withholding, as
described further below)."

p.33:     "If a foreign account holder is the beneficial owner of a payment, then a QI may shield the 
account holder’s identity from U.S. custodians and the IRS.  If a foreign account holder is not the
beneficial owner of a payment (for example, because the account holder is a nominee), the
account holder must provide the QI with an IRS Form W-8IMY for itself along with specific
information about each beneficial owner to which the payment relates.  A QI that receives this
information may shield the account holder’s identity from a U.S. custodian, but not from the 
IRS.151
    In general, if an account holder is a U.S. person, the account holder must provide the QI
with an IRS Form W-9 or appropriate documentary evidence that supports the account holder’s
status as a U.S. person.  However, if a QI does not have sufficient documentation to determine
whether an account holder is a U.S. or foreign person, the QI must apply certain presumption 
rules detailed in the QI agreement.  These presumption rules may not be used to grant a reduced
rate of nonresident withholding; instead they merely determine whether a payment should be
subject to full nonresident withholding (at a 30-percent rate), subject to backup withholding (at a 
28-percent rate), or treated as exempt from backup withholding.
    In general, under the QI agreement presumptions, U.S.-source investment income that is
paid outside the United States to an offshore account is presumed to be paid to an undocumented
foreign account holder.  A QI must treat such a payment as subject to withholding at a 30-percent
rate and report the payment to an unknown account holder on IRS Form 1042-S.  However, most
U.S.-source deposit interest and interest or original issue discount on short-term obligations that
is paid outside the United States to an offshore account is presumed made to an undocumented 
U.S. non-exempt recipient account holder and thus is subject to backup withholding at a 28-
percent rate.152  Importantly, both foreign-source income and broker proceeds are presumed to be
paid to a U.S. exempt recipient (and thus are exempt from both nonresident and backup
withholding) when such amounts are paid outside the United States to an offshore account."

p.35:    "Foreign law prohibition of disclosure 
The QI agreement includes procedures to address situations in which foreign law
(including by contract) prohibits the QI from disclosing the identities of U.S. non-exempt
recipients (such as individuals).  Separate procedures are provided for accounts established with
a QI prior to January 1, 2001, and for accounts established on or after January 1, 2001.
Accounts established prior to January 1, 2001.–For accounts established prior to January
1, 2001, if the QI knows that the account holder is a U.S. non-exempt recipient, the QI must (1)
request from the account holder the authority to disclose its name, address, TIN (if available),
and reportable payments; (2) request from the account holder the authority to sell any assets that
generate, or could generate, reportable payments; or (3) request that the account holder disclose
itself by mandating the QI to provide an IRS Form W-9 completed by the account holder.  The
QI must make these requests at least two times during each calendar year and in a manner
consistent with the QI’s normal communications with the account holder (or at the time and in
the manner that the QI is authorized to communicate with the account holder).  Until the QI
receives a waiver on all prohibitions against disclosure, authorization to sell all assets that
generate, or could generate, reportable payments, or a mandate from the account holder to
provide an IRS Form W-9, the QI must backup withhold on all reportable payments paid
to the account holder and report those payments on IRS Form 1099 or, in certain cases, provide
another withholding agent with all of the information required for that withholding agent to backup
withhold and report the payments on IRS Form 1099.
Accounts established on or after January 1, 2001.–For any account established by a U.S.
non-exempt recipient on or after January 1, 2001, the QI must (1) request from the account
holder the authority to disclose its name, address, TIN (if available), and reportable payments;
(2) request from the account holder, prior to opening the account, the authority to exclude from
the account holder’s account any assets that generate, or could generate, reportable payments; or
(3) request that the account holder disclose itself by mandating the QI to transfer an IRS Form
W-9 completed by the account holder.
    If a QI is authorized to disclose the account holder’s name, address, TIN, and reportable
amounts, it must obtain a valid IRS Form W-9 from the account holder, and, to the extent the QI
does not have primary IRS Form 1099 and backup withholding responsibility, provide the IRS
Form W-9 to the appropriate withholding agent promptly after obtaining the form.  If an IRS
Form W-9 is not obtained, the QI must provide the account holder’s name, address, and TIN (if
available) to the withholding agents from whom the QI receives reportable amounts on behalf of
the account holder, together with the withholding rate applicable to the account holder.  If a QI is
not authorized to disclose an account holder’s name, address, TIN (if available), and reportable
amounts, but is authorized to exclude from the account holder’s account any assets that generate,
or could generate, reportable payments, the QI must follow procedures designed to ensure that it
will not hold any assets that generate, or could generate, reportable payments in the account
holder’s account.157" [thus: if QI is not authorized to exclude US securities from an account,
QI need not report the account holder to the IRS but is obliged to impose on the US assets
in question the IRS' fiat28% backup withholding tax which the only constitutional lawmaker,
i.e. the U.S. Congress, is not on record for ever having even considered, much less approved]
 

Extracts from the IRS' QI Regulations
Sec. 2.07. Broker Proceeds. “Broker proceeds” means the gross proceeds from a sale
of an asset to the extent that the gross proceeds would be subject to Form 1099 reporting
if paid to a U.S. non-exempt recipient. For purposes of this Agreement, broker proceeds
also include any proceeds paid by QI from the sale of assets pursuant to the provisions
of section 6.04 of this Agreement that are owned by a U.S. non-exempt recipient and that
produce, or could produce, reportable payments regardless of whether the sale is effected
at an office inside or outside the United States and regardless of whether or not the sale
is effected by QI or another person on instructions from QI. Thus, the exception in Treas.
Reg. §1.6045-1(a), which excludes from Form 1099 reporting certain sales effected at an
office outside the United States, shall not apply in the case of U.S. non-exempt recipients
whose identity is prohibited by law from disclosure. In addition, the exception from backup
withholding on certain payments contained in Treas. Reg. §31.3406(g)-1(e) shall not apply
to such broker proceeds.
...
Sec. 2.44. Reportable Payment.  For purposes of this Agreement, a reportable payment
means amounts described in section 2.44(A) of this Agreement, in the case of a U.S.payor,
and amounts described in section 2.44(B) of this Agreement, in the case of a non-U.S. payor.
(A) U.S. Payor.  If QI is a U.S. payor, a reportable payment means any reportable payment
as defined in section 3406(b) of the Code, including any broker proceeds from the sale of
assets beneficially owned by a U.S. non-exempt recipient account holder that produce, or
could produce, reportable payments if the identity and account information of that account
holder is prohibited by law, including by contract, from disclosure as described in section
6.04 of this Agreement.   For this purpose, it is irrelevant whether the sale is effected by
QI or QI instructs another person to effect the sale.  It is also irrelevant whether the sale
is effected at an office inside or outside the United States. Thus, the exception in Treas.
Reg. §1.6045-1(a) (which excepts sales effected at an office outside the United States by
a non-U.S. payor) and the exception in Treas. Reg. 31.3406(g)-1(e) (which excepts certain
payments made outside the United States from backup withholding) do not apply in the
case of an account holder whose identity is prohibited by law from disclosure.
(B) Non-U.S. Payor.  If QI is a non-U.S. payor a reportable payment means–
(1) Any reportable amount (unless an exception to reporting applies under chapter 61 of
the Code);
(2) Any broker proceeds from the sale of assets that produce, or could produce, reportable
amounts if the sale is effected at an office inside the United States, as defined in Treas.
Reg. §1.6045-1(g)(3), (unless an exception to reporting applies under chapter 61 of the
Code);
(3) Any broker proceeds from the sale of an asset that produces, or could produce,
reportable amounts that are beneficially owned by a U.S. non-exempt recipient whose
identity and account information is prohibited by law, including by contract, from disclosure
as described in section 6.04 of this Agreement. For this purpose, it is irrelevant whether
the sale is effected by QI or another person upon instructions from QI.  It is also irrelevant
whether the sale is effected at an office inside or outside the United States.  Thus, the
exception in Treas. Reg. §1.6045-1(a) (which excepts sales effected at an office outside
the United States by a non-U.S. payor) and the exception in Treas. Reg. 31.3406(g)-1(e)
(which excepts certain payments made outside the United States from backup withholding)
do not apply in the case of an account holder whose identity is prohibited by law from
disclosure; and
(4) Any foreign source interest, dividends, rents, royalties, or other fixed and determinable
income if such income is paid in the United States or to an account maintained in the
United States or any other amount presumed paid to a U.S. non-exempt recipient under
section 5.13(C)(4) of this Agreement (unless an exception to reporting applies under
chapter 61 of the Code).
...
Sec. 3.04. Backup Withholding Responsibility. QI is a payor under section 3406 of the
Code with respect to reportable payments. Under section 3406, a payor is required to
deduct and withhold 31 percent [this was later amended to 28%] from the payment of a
reportable payment to a U.S. nonexempt recipient if the U.S. non-exempt recipient has
not provided its TIN in the manner required under that section; the IRS notifies the payor that
the TIN furnished by the payee is incorrect; there has been a notified payee under-reporting
described in section 3406(c); or there has been a payee certification failure described in section
3406(d). QI represents that [due to the suspension of article 271 CP by CF Villiger]
there are no legal restrictions that prohibit it from complying with the Form 1099 reporting
requirements of this Agreement or imposing backup withholding and depositing the amounts
withheld in accordance with section 3.08 of this Agreement.
...
Sec. 3.08. Deposit Requirements. If QI is a U.S. payor or a non-U.S. payor that
assumes primary NRA withholding responsibility or primary Form 1099 and backup
withholding responsibility, it must deposit amounts withheld under chapter 3 or section
3406 of the Code with a Federal Reserve bank or authorized financial institution at the
time and in the manner provided under section 6302 of the Code (see Treas. Reg.
§1.6302-2(a) or §31.6302-1(h)). If QI is a non-U.S. payor that does not assume primary
NRA withholding responsibility or primary Form 1099 and backup withholding
responsibility, QI must deposit amounts withheld by the 15th day following the month in
which the NRA or backup withholding occurred.
...
Sec. 5.09. Documentation for U.S. Non-Exempt Recipients. QI shall not treat an
account holder as a U.S. non-exempt recipient unless QI obtains a valid Form W-9 from
the account holder, QI knows an account holder is a U.S. non-exempt recipient, or QI must
presume a person is a U.S. non-exempt recipient under sections 5.13(C)(2) or (4) of this
Agreement. See section 6.04 of this Agreement for rules that apply if the identity of a U.S.
non-exempt recipient is prohibited by law from being disclosed.
...
Sec. 1.13 (C) (2) Payments of Deposit Interest and OID on Short-Term Obligations.
An amount of U.S. source deposit interest (other than an amount that is part of the purchase price
of a certificate of deposit sold in a transaction other than a redemption) or an amount of U.S.
source interest or original issue discount on the redemption of a short-term obligation that
is paid outside the United States to an offshore account is presumed made to an
undocumented U.S. non-exempt recipient account holder. QI must backup withhold at 31
percent [this was later amended to 28%] and report such amounts on Form 1099
unless it has provided sufficient information for another payor from which it receives such amounts
to backup withhold and report the payments and QI does not know that the other payor has failed
to backup withhold or report.
... p.40-43:    Sec. 6.04. Legal Prohibitions Against Disclosure of U.S. Non-Exempt Recipients.
(A) Accounts Established Prior to January 1, 2001. If QI knows an account holder is
a U.S. non-exempt recipient and the account holder’s account was established with QI
prior to January 1, 2001 (a pre-2001 account), QI agrees to the following procedures:
(1) If QI is prohibited by law, including by contract, from disclosing to a withholding agent
or to the IRS on Form 1099 the account holder’s name, address, and TIN, for reportable
payments paid to the account holder, then QI must–
(i) Request from the account holder the authority to make such a disclosure;
(ii) Request from the account holder the authority to sell any assets that generate, or could
generate, reportable payments; or
(iii) Request that the account holder disclose himself by mandating QI to provide a Form
W-9 completed by the account holder.
(2) QI must make the requests described in section 6.04(A)(1) at least two times during
each calendar year and in a manner consistent with QI’s normal communications with the
account holder (e.g., by mail, telephone, etc.). If QI is not authorized to initiate
communications with the account holder (e.g., QI can only communicate with the account
holder in person), QI must make the request at the time and in the manner that QI is
authorized to communicate with the account holder.
(3) Until QI receives a waiver of all prohibitions against disclosure or authorization to sell
all assets that generate, or could generate, reportable payments, or a mandate from the
account holder to provide a Form W-9, QI shall backup withhold on all reportable
payments paid to the account holder and report those payments on Form 1099 or, in the
case of reportable amounts and designated proceeds, provide another withholding agent
with all the information required for that withholding agent to backup withhold and report
the payments on Form 1099. If the account holder disposes of any assets that generate,
or could generate, reportable payments prior to providing QI with a waiver of all
prohibitions against disclosure or authorization to sell all such assets, QI shall apply
backup withholding and Form 1099 reporting in accordance with sections 3 and 8 of this
Agreement.
(4) If QI has not assumed primary Form 1099 reporting and backup withholding
responsibility but is authorized, or is mandated, to disclose the account holder’s name,
address, TIN and reportable amounts (and, designated broker proceeds if section 3.05(C)
of this Agreement applies) to a withholding agent, QI must provide the account holder’s
Form W-9 (or, if a Form W-9 was not obtained, the account holder’s name, address, and
TIN, if available) to the withholding agent together with appropriate withholding rate pool
information within 30 days of the date QI receives such authorization.
(5) If QI is authorized to dispose of the account holder’s assets that generate, or could
generate, reportable payments, QI must sell or exchange all such assets within 60 days
of receiving authorization. In addition, if QI later discovers that an account contains such
assets, QI must sell such assets within 60 days of the discovery. See sections 3 and 8 of
this Agreement for backup withholding and Form 1099 reporting responsibilities.
(6) If QI is not authorized to disclose the account holder’s identity or to sell or exchange
all of the account holder’s assets that generate or could generate reportable payments, but
QI is not prohibited by law, including by contract, from disposing of the account holder’s
assets even though it has not obtained specific authorization, QI must sell or exchange all
such assets on or before December 31, 2002, and apply backup withholding and Form
1099 reporting in accordance with sections 3 and 8 of this Agreement.
(B) Account Holder Discovered to be U.S. Non-Exempt Recipient. If QI’s records
indicate that the account holder of a pre-2001 account is a foreign person and the QI
discovers that the account holder is a U.S. non-exempt recipient, QI shall follow the
procedures of section 6.04(A) of this Agreement, except that if QI may legally sell or
exchange the account holder’s assets that generate, or could generate, reportable
payments without authorization, QI must sell or exchange all such assets on or before the
date that is 365 days after QI learns that the account holder is a U.S. non-exempt
recipient, or, if later, December 31, 2002.
(C) Accounts Opened on or After January 1, 2001. QI agrees to the following
procedures for accounts opened by U.S. non-exempt recipients on or after January 1,
2001 (post-2000 accounts):
(1) If QI is prohibited by law, including by contract, from disclosing to a withholding agent
or to the IRS on Form 1099 the account holder’s name, address, and TIN, for reportable
payments paid to the account holder, then QI must–
(i) Request from the account holder the authority to make such a disclosure;
(ii) Request from the account holder, prior to opening the account, the authority to exclude
from the account holder’s account any assets that generate, or could generate, reportable
payments; or
(iii) Request that the account holder disclose himself by mandating QI to transfer a Form
W-9 completed by the account holder.
(2) If QI is authorized to disclose the account holder’s name, address, TIN (if available)
and reportable amounts (and designated broker proceeds, if section 3.05(C) of this
Agreement applies), QI must obtain a valid Form W-9 from the account holder and, to the
extent QI does not have primary Form 1099 and backup withholding responsibility, provide
the Form W-9 to the appropriate withholding agent promptly after obtaining the Form W-9.
If a Form W-9 is not obtained, then QI must provide the account holder’s name, address,
and TIN, if any, to the withholding agents from whom QI receives reportable amounts (and,
if applicable, designated broker proceeds) on behalf of the account holder together with
appropriate withholding rate pool information relating to the account holder. To the extent
QI has assumed primary Form 1099 reporting and backup withholding, it must backup
withhold on all reportable payments until it receives a valid Form W-9.
(3) If QI is not authorized to disclose an account holder’s name and other required
information but is authorized to exclude from the account holder’s account any assets that
generate, or could generate, reportable payments, QI must follow procedures designed to
ensure that it will not hold any assets that generate, or could generate, reportable
payments in the account holder’s account.
(4) If QI is authorized to exclude from the account holder’s account any assets that
generate, or could generate, reportable payments and QI discovers that the account
contains such assets, QI must sell such assets within 60 days of discovering such assets
and apply backup withholding and Form 1099 reporting in accordance with sections 3 and
8 of this Agreement.
(5) QI agrees that if any account holder in a post-2000 account is discovered, after the
opening of the account, to be a U.S. non-exempt recipient then QI will–
(i) Immediately correct the withholding statement information provided to the withholding
agent, if necessary, and
(ii) Either obtain a Form W-9 within 60 days of discovering that the account holder is a
U.S. non-exempt recipient, and, if QI has not assumed primary Form 1099 reporting and
backup withholding responsibility, provide the Form W-9 to the appropriate withholding
agents together with appropriate withholding pool information promptly after obtaining the
Form W-9 or, if QI is not authorized to disclose account holder information, sell all of
the account holder’s assets that generate or could generate reportable payments within 60
calendar days from the day that QI discovers the account holder is a U.S. non-exempt
recipient. QI must backup withhold, or instruct a withholding agent to backup withhold on
any reportable payments made after the time QI discovers the account holder’s U.S. nonexempt
recipient status and before obtaining a valid Form W-9 from the account holder.
...

Sec. 12.02. This Agreement may be amended by the IRS if the IRS determines that such
amendment is needed for the sound administration of the internal revenue laws or internal
revenue regulations. The agreement may also be modified by either QI or the IRS upon
mutual agreement. Such amendments or modifications shall be in writing.
Sec. 12.03. Any waiver of a provision of this Agreement is a waiver solely of that
provision. The waiver does not obligate the IRS to waive other provisions of this
Agreement or the same provision at a later date.
Sec. 12.04. This Agreement shall be governed by the laws of the United States. Any legal
action brought under this Agreement shall be brought only in a United States court with
jurisdiction to hear and resolve matters under the internal revenue laws of the United
States. For this purpose, QI agrees to submit to the jurisdiction of such United States
court.