Q: In a merger with another credit union, we have acquired a
number of non-resident alien accounts.
Can we rely on the existing documentation for these accounts, or do we
have to verify the members’ foreign status?
A: According to the IRS's March 2014 temporary
regulations, a withholding agent that acquires an account in a merger from a
U.S. withholding agent may rely on the predecessor’s or transferor’s
determination of the account holder’s non-resident alien status for a
transition period of the lesser of six months from the date of the merger or until
the acquirer knows that the claim of foreign status is inaccurate or a change
in circumstances occurs. At the end of
the transition period, the acquirer will be permitted to rely upon the
predecessor’s determination as to the non-resident alien status only if the
documentation that the acquirer has for the account holder, supports the status
claimed. An acquirer that discovers at the end of the transition period that
the non-resident alien status was incorrect and has not withheld as would have
been required, will be required to withhold on future payments.