Reg. § 31.3406(b)(3)-4 Reportable payments of royalties.
(a) Royalty payments subject to backup withholding A payment of a kind, and to a payee, that is required to be reported under section (relating to information reporting of payments of royalties) 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 In general, the amount described in of this section that is subject to withholding under section is the amount subject to reporting under section . However, if the reportable payment is for an oil or gas interest, the amount subject to withholding is the net amount the payee receives (i.e., the gross proceeds less production-related taxes such as state severance taxes).
[T.D. 8637, 60 FR 66119, Dec. 21, 1995]