(a) Requirement to backup withhold. Withholding under section 3406(a)(1)(D) applies to a reportable interest or dividend payment (as defined in section 3406(b)(2)) if, and only if, the payee fails to certify to the payor, under penalties of perjury, that the payee is not subject to withholding due to notified payee underreporting under section 3406(a)(1)(C). The period for which withholding applies is described in § 31.3406(e)-1(e). See § 31.3406(d)-3(a) for special rules when an account is established directly with, or an instrument is acquired directly from, the payor by electronic transmission or by mail. See § 31.3406(c)-1(c)(3)(iv) for rules with respect to a payor's reliance on a payee certification for a new account following notified payee underreporting. See § 31.3406(d)-4 for special rules relating to the acquisition of a readily tradable instrument through a broker. The certificate on which the certification should be made is described in § 31.3406(h)-3.
(b) Exceptions. Withholding under section 3406(a)(1)(D) and paragraph (a) of this section does not apply to reportable interest or dividend payments (as defined in section 3406(b)(2)) made—
(1) With respect to a pre-1984 account (as defined in § 31.3406(d)-1(b)(1));
(2) In a window transaction (as defined in § 31.3406(b)(2)-3(b));
(3) With respect to a readily tradable instrument described in § 31.3406(d)-1(b)(2)(iv) or § 31.3406(d)-4(a)(3); or
(4) During the period and with respect to an account or readily tradable instrument described in § 31.3406(d)-3.
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