Withholding agents for foreign taxpayers who fail to deposit the correct amount will soon see new regulations regarding limits on claims or refunds.
 
In Notice 2015-10, the IRS said the regulations "will provide that an otherwise allowable claim for refund or credit made by a claimant that is the beneficial owner of a withheld payment is only available to the extent that the relevant withholding agent deposited the amount withheld. 

The regulations will also provide for a pro rata allocation of the amount available to the claimant for refund or credit when a withholding agent has partially satisfied its deposit requirements, according to the notice, which also sought comments on the pro rata allocation procedural rules. The IRS is considering exceptions to the general rules to minimize the potential for fraud or intentional under-depositing of withholding taxes.
 
The IRS said that it is concerned with cases in which individuals subject to withholdings under tax code Section 1441 through Section 1443, which in part deal with withholding tax on nonresident aliens and foreign corporations, are making or will make the refund claims for refunds as required by Section 6302.
 
The IRS said it acted because of a concern that "if a refund or credit is issued for an amount that has not been deposited, the IRS may not be able to recover that amount because the claimant, and in some cases the relevant withholding agent, may be outside the United States."
 
Notice 2015-10 will be published in Internal Revenue Bulletin 2015-20 on May 18.  A copy is available here.