Non-Foreign Certificate Explained

Section 145 of the Internal Revenue Code is a provision that requires a Buyer of a U.S. real property interest to withhold tax at a rate of 15% of the amount realized on the disposition if the Seller is a foreign person. However, there are certain situations in which the Buyer may be exempt from this requirement. In such cases, the Seller must provide a certification to the Buyer to inform them that withholding of tax is not required upon the transfer of the property.

This certification is known as the Section 1445 Certification and is made under penalty of perjury. The certification must contain specific information about the Seller and the property being transferred. The undersigned (Seller) must swear, affirm, and certify the following:

The undersigned is not a foreign person or entity subject to the withholding tax requirements of Section 1445 of the Internal Revenue Code.

The undersigned is not a disregarded entity or grantor trust as defined in the Internal Revenue Code and has provided the Buyer with the correct taxpayer identification number (TIN).

The undersigned is not transferring a U.S. real property interest as part of a trade or business conducted within the United States.

The amount realized by the undersigned from the transfer of the U.S. real property interest does not exceed $300,000, and the Buyer intends to use the property as their principal residence.

By providing this certification, the Seller is informing the Buyer that withholding of tax is not required upon the transfer of the property. If the certification is not provided or is later found to be false, the Buyer may be held liable for the withholding tax.

It's important to note that if the Seller is a foreign person or entity subject to the withholding tax requirements of Section 1445, the Buyer must withhold tax at a rate of 15% of the amount realized on the disposition. The withholding tax must be paid to the IRS within 20 days after the transfer of the property.

In conclusion, Section 145 of the Internal Revenue Code requires Buyers of U.S. real property interests to withhold tax if the Seller is a foreign person. However, if the Seller provides a Section 1445 Certification to the Buyer, informing them that withholding tax is not required, the Buyer may be exempt from this requirement. It's important for both the Buyer and the Seller to understand their obligations and requirements under this provision of the Internal Revenue Code.

What does this mean for the notary? The signer must fill this out and it is important to note that the SSN and address must be filled out. This is something that is missed fairly regularly so please be sure you are double checking this document.



After the document is filled out, this document must also be notarized.

Updated on: 22/04/2023