Reg. § 31.3406(b)(2)-5 Reportable patronage dividend payment.
(a) Patronage dividends subject to backup withholding A payment of a kind, and to a payee, that is required to be reported under section (relating to returns regarding patronage dividends) is a reportable payment for purposes of section . See for the requirement to furnish a statement to the payee if tax is withheld under section .
(b) Amount subject to backup withholding
(1) Failure to provide taxpayer identification number or notification of incorrect taxpayer identification number For purposes of sections (A) and (B), the amount of a payment described in of this section that is subject to withholding under section is the amount subject to reporting under section , but only to the extent the payment is made in money. For purposes of this , money includes cash or a qualified check (as defined in section ).
(2) Notified payee underreporting or payee certification failure For purposes of sections (C) and (D), the amount of a payment described in of this section that is subject to withholding under section is the amount subject to withholding under of this section, but only if 50 percent or more of that reportable amount is paid in money. Thus, a payor is required to withhold according to this on a payment if—
(i) There has been a notified payee underreporting described in section and or there has been a payee certification failure described in section and ;
(ii) The payor makes a reportable payment subject to reporting under section to the payee; and
(iii) Fifty percent or more of the payment is in cash or by qualified check.
[T.D. 8637, 60 FR 66117, Dec. 21, 1995]