(1) In generalThe requirements of this subsection are met with respect to any foreign financial institution if an agreement is in effect between such institution and the Secretary under which such institution agrees—(A) to obtain such information regarding each holder of each account maintained by such institution as is necessary to determine which (if any) of such accounts are United States accounts,
(B) to comply with such verification and due diligence procedures as the Secretary may require with respect to the identification of United States accounts,
(C) in the case of any United States account maintained by such institution, to report on an annual basis the information described in subsection (c) with respect to such account,
(D) to deduct and withhold a tax equal to 30 percent of—(i) any passthru payment which is made by such institution to a recalcitrant account holder or another foreign financial institution which does not meet the requirements of this subsection, and
(ii) in the case of any passthru payment which is made by such institution to a foreign financial institution which has in effect an election under paragraph (3) with respect to such payment, so much of such payment as is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection,
(E) to comply with requests by the Secretary for additional information with respect to any United States account maintained by such institution, and
(F) in any case in which any foreign law would (but for a waiver described in clause (i)) prevent the reporting of any information referred to in this subsection or subsection (c) with respect to any United States account maintained by such institution—(i) to attempt to obtain a valid and effective waiver of such law from each holder of such account, and
(ii) if a waiver described in clause (i) is not obtained from each such holder within a reasonable period of time, to close such account.
Any agreement entered into under this subsection may be terminated by the Secretary upon a determination by the Secretary that the foreign financial institution is out of compliance with such agreement.
(2) Financial institutions deemed to meet requirements in certain casesA foreign financial institution may be treated by the Secretary as meeting the requirements of this subsection if—(A) such institution—(i) complies with such procedures as the Secretary may prescribe to ensure that such institution does not maintain United States accounts, and
(ii) meets such other requirements as the Secretary may prescribe with respect to accounts of other foreign financial institutions maintained by such institution, or
(B) such institution is a member of a class of institutions with respect to which the Secretary has determined that the application of this section is not necessary to carry out the purposes of this section.
(3) Election to be withheld upon rather than withhold on payments to recalcitrant account holders and nonparticipating foreign financial institutionsIn the case of a foreign financial institution which meets the requirements of this subsection and such other requirements as the Secretary may provide and which elects the application of this paragraph—(A) the requirements of paragraph (1)(D) shall not apply,
(B) the withholding tax imposed under subsection (a) shall apply with respect to any withholdable payment to such institution to the extent such payment is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection, and
(C) the agreement described in paragraph (1) shall—(i) require such institution to notify the withholding agent with respect to each such payment of the institution’s election under this paragraph and such other information as may be necessary for the withholding agent to determine the appropriate amount to deduct and withhold from such payment, and
(ii) include a waiver of any right under any treaty of the United States with respect to any amount deducted and withheld pursuant to an election under this paragraph.
To the extent provided by the Secretary, the election under this paragraph may be made with respect to certain classes or types of accounts of the foreign financial institution.