On 13 December 2022, the U.S. Internal Revenue Service (IRS) released the final 2023 Qualified Intermediary (QI) Agreement (Revenue Procedure 2022-43). The 2023 QI Agreement is effective as of 1 January 2023 for a six-year term expiring on 31 December 2028. QIs that seek to renew their QI Agreement with an effective date of 1 January 2023 must do so by 1 May 2023.

Nenad ILIC, Tax Partner at PwC Luxembourg & co-Chair of the ABBL Tax Reporting Standards working group, shares an analysis of the main provisions of the new agreement as we intend to discuss this topic in detail with members in the coming weeks.

The 2023 QI Agreement includes provisions allowing intermediaries to enter into the QI Agreement for purposes of the withholding and reporting required under sections 1446(a) and (f) with respect to their account holders holding interests in Publicly-Traded Partnerships (PTPs). Under the new QI Agreement, QIs will have the option to:

  • assume primary withholding responsibility with respect to PTP distributions or amounts realized upon sale or transfer of PTP interests or
  • act as “disclosing QIs” in which case they will be required to transmit their account holder documentation to the upstream withholding agent (typically the US sub-custodian).

QIs will also have the possibility to not act as QIs (i.e., as NQIs) with respect to PTP distributions and/or amounts realized.

Other relevant changes include:

  • The requirement to provide a copy of the periodic review report along with the certification of internal controls
  • The requirement to provide a detailed remediation plan in case of a qualified certification (i.e., if the responsible officer has identified a material failure that QI has not corrected as of the date of the certification or an event of default applicable to the certification period)
  •  Additional certifications and information to be provided by QIs that act as QIs with respect to PTP-related payments (either as withholding QIs or as disclosing QIs)
  • The requirement for all QIs and not only for those QIs that act as Qualified Derivatives Dealers (QDDs) to certify that they made good faith efforts to comply with section 871(m) regulations
  • Eligibility for QDDs to apply for a waiver of periodic review requirement for calendar years 2023 and 2024 (provided the relevant conditions are met)
  • The definition of material failures has been expanded to cover a finding for one or more years that the QI failed to comply with the documentation, withholding and information reporting requirements on PTP-related payments
  • Broadening of the standards for independence for external reviewers replacing the previous, more prescriptive requirement according to which an external reviewer “cannot be reviewing systems, policies, or procedures or the results thereof that it (or the firm with which it was affiliated) was involved in designing, implementing, or maintaining”
  • Changes to the safe harbour method for sampling accounts subject to periodic review.

It is also worth noting that the IRS intends to publish a list of QIs (with the name, the QI status and the QI-EIN). QIs will need to provide consent upon application / renewal for QI status to have this information disclosed.

Finally, beginning in spring 2023, QI Responsible Officers and other users of Qualified Intermediary, Withholding Foreign Partnership, and Withholding Foreign Trust Application and Account Management System (QAAMS) will be required to have completed the credentialing process with a credential service provider (CSP) and utilize multi-factor authentication to access QAAMS.

This topic is closely followed by the ABBL and will be discussed in more detail by the members of the technical working group dedicated to tax reporting.


ABBL contact: Laétitia Carroz, Tax Adviser