Dhs-ice-pia-005

Privacy Impact Assessment Update
for the

Bond Management Information System
January 19, 2011
Contact Point
Radha Sekar
Chief Financial Officer
U.S. Immigration & Customs Enforcement
(202) 732-7500
Reviewing Official
Mary Ellen Callahan
Chief Privacy Officer
Department of Homeland Security
(703) 235-0780

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Abstract
The Bond Management Information System (BMIS) is an immigration bond management
database used primarily by the Office of Financial Management (OFM) at U.S. Immigration and Customs
Enforcement (ICE).1 The basic function of BMIS is to support the financial management of immigration
bonds posted for the release of aliens in ICE custody. Among other things, ICE uses BMIS to calculate
and pay interest to obligors who post cash immigration bonds. Under Internal Revenue Service (IRS)
rules, interest payments to certain obligors are subject to backup withholdings where a percentage of the
payment is withheld as tax and sent to the IRS. To begin to implement the backup withholding rules, ICE
is modifying BMIS to collect additional information about obligors to determine whether a backup
withholding is required. Because ICE is expanding the scope of information collected and the purposes
for which BMIS information is being used, an update to the BMIS PIA is required.

Introduction
BMIS is an immigration bond financial management database used to track the financial lifecycle
of immigration bonds issued by ICE. ICE uses BMIS to, among other things, calculate and pay interest to
persons who post cash bonds (obligors) with ICE. In early 2011, ICE will begin withholding income
taxes from these interest payments for certain categories of obligors in order to comply with IRS backup
withholding rules. System changes to BMIS are required before these backup withholdings can begin.
Backup Withholding Requirements
IRS backup withholding rules require payers of interest, including federal agencies like ICE, to
withhold a certain percentage of income tax when the recipient is not exempt from this withholding.
When the interest payment recipient is a U.S. citizen or lawful permanent resident (LPR), the recipient
generally is exempt from backup withholdings unless the recipient’s Taxpayer Identification Number
(TIN) is missing or incorrect. A recipient who is a non-resident alien generally is not exempt from
backup withholdings at all, whether or not a valid TIN was provided. Payers of interest are required to
provide the TIN to the IRS when reporting paid interest or withholding taxes. Payers of interest must
request TINs from the interest recipients, and recipients must provide the TIN if they are U.S. citizens or
LPRs. See 26 U.S.C. § 6109(a)(3), 26 CFR §§ 301.6109-1(b)(1) and (c).
Conducting Backup Withholding at ICE
To comply with these IRS requirements, in early 2011 ICE will begin to withhold taxes from
interest payments to obligors who are non-resident aliens or who have not provided a valid TIN. (For
many individual obligors, the TIN is likely to be the Social Security Number (SSN)). Accordingly, ICE
is modifying BMIS to collect information necessary to identify those obligors subject to backup
withholdings and to carry out the withholding of taxes where required. With this change, ICE will now
input in BMIS the tax status (U.S. citizen/LPR, or Foreign Person) of all cash bond obligors and whether
they are subject to backup withholdings under IRS rules. For non-resident aliens only, BMIS will also

1

In previous PIAs, this system was referred to as the Bond Management Information System – Web Version (BMIS

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capture whether the United States has a tax treaty with their country of citizenship and if so the
percentage of withholding authorized by the treaty.
ICE will use existing IRS forms that are specifically designed to collect this type information
from income recipients for tax purposes. At the time the obligor is posting the bond at an ICE field
office, ICE officers will provide the obligor with a “Notice to Cash Bond Obligors,” which asks the
obligor to complete and mail the appropriate IRS form to OFM.2 The notice asks U.S. Citizens and LPRs
to complete IRS Form W-9, “Request for Taxpayer Identification Number and Certification,” and nonresident aliens to complete IRS Form W-8BEN “Certificate of Foreign Status of Beneficial Owner for
United States Tax Withholding.”3 It also explains why the information is being collected and provides a
toll-free number to contact the IRS if the obligor has questions about the forms.
The stated purpose of the IRS Form W-9 is to have an income recipient establish that he/she is a
U.S. citizen or LPR, and to have him/her provide the correct TIN to the person paying the income. The
W-9 notifies the recipient of the mandatory nature of this disclosure and the authority under which it is
mandated (Section 6109 of the Internal Revenue Code). The stated purpose of the IRS Form W-8BEN is
to establish that an income recipient is not a U.S. citizen or LPR, and to allow him/her to claim a reduced
rate of, or exemption from, backup withholdings as a resident of a foreign country with which the United
States has an income tax treaty. Payers of income may rely on a properly completed W-8BEN to apply a
reduced rate of withholding based on a tax treaty. The W-8BEN also provides notice that failure to
complete the form may lead to a withholding at the standard backup withholdings rate.
Once OFM receives the W-9 or W-8BEN, it will enter in BMIS the obligor’s tax status, whether
they are subject to backup withholdings, and the tax treaty status and withholding rate of any obligor that
is a non-resident alien. OFM will file a scanned copy of the IRS form in another ICE OFM system
known as File-On-Q, and securely destroy the paper copy. Using another ICE system known as the
Federal Financial Management System (FFMS), ICE will withhold the taxes (as required) when the
interest payment is being processed, and will deposit the taxes in a Treasury account. For taxes withheld
on payments made to U.S. citizens or LPRs, on an annual basis ICE will report the interest paid and taxes
withheld to the IRS using Form 945 and to the obligor using Form 1099-INT.4 For taxes withheld on
payments made to non-resident aliens, ICE will report the interest paid and taxes withheld to the IRS
using Form 1042 and to the obligor using Form 1042-S.5 When a backup withholding occurs, BMIS will
also record the amount of taxes withheld.
The information maintained in and shared from BMIS is covered under the DHS/ICE-003 BMIS
System of Records Notice (SORN), 74 FR 67891, December 21, 2009. The BMIS SORN is being

Web). The Privacy Impact Assessment (PIA) for this system was originally published in August 2008.
2
For more information about the process of posting a cash immigration bond, see the BMIS PIA (August 2008) and
the BMIS PIA Update (November 2009).
3
OMB No. 1545-1621.
4
IRS Form 945, “Annual Return of Withheld Federal Income Tax,” OMB No. 1545-1430; IRS Form 1099-INT,
“Interest Income,” OMB No. 1545-0122.
5
IRS Form 1042, “Annual Withholding Tax Return for U.S. Source Income of Foreign Persons,” OMB No. 15450096; IRS Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding,” OMB No. 1545-0096.

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updated concurrently with the publication of this PIA Update to modify an existing routine use in order to
clarify the disclosure of income tax-related information to the IRS.

Reason for the PIA Update
This PIA is being updated to reflect additional information that ICE will collect and store in
BMIS in order to carry out backup withholdings pursuant to IRS regulatory requirements. This update
also provides notice to the public about ICE’s initiation of backup withholdings as well as the expanded
use of BMIS to support this new process.

Privacy Impact Analysis
In each of the below sections consider how the system has changed and what impact it has on the below fair
information principles. In some cases there may be no changes and indicate as such.

The System and the Information Collected and Stored within the System
ICE will collect from obligors who are U.S. citizens and LPRs all information required on IRS
Form W-9: name, address, business name and type (if the obligor is a business entity), and TIN (SSN or
Employer Identification Number). ICE will collect from all other obligors the information required on
IRS Form W-8BEN: name, permanent residence address, mailing address, organization name and type (if
the obligor is a business, trust, etc.), foreign tax identification number, and U.S. TIN (SSN or Employer
Identification Number). For tax treaty purposes the W8-BEN also requires the individual to provide the
country of which they claim to be a resident, claimed rate of withholding, and reasons for treaty
application.
From the information provided on the W-9 or the W-8BEN, ICE will update the bond record in
BMIS to add the obligor’s status (U.S. Citizen/LPR or Foreign Person) and whether they are subject to
backup withholdings (Yes/No). For obligors whose tax status is foreign person, ICE will also update
BMIS to indicate (Yes/No) whether the obligor’s country of residence as reflected on the W-8BEN is a
nation with which the United States has an income tax treaty. (The country of residence itself is not input
into the system.) If the answer is “yes,” ICE will also enter in BMIS the percentage of withholding
authorized by that treaty. The other information provided on the IRS forms is not input into BMIS, but is
retained in a scanned image of the form in File-On-Q.

Uses of the System and the Information
With this change, the use of BMIS has expanded and the system is now used to help calculate,
record, and execute backup withholdings of income tax on interest payments to bond obligors, as required
by IRS rules.
ICE uses the TIN/SSN to provide withheld income tax to the IRS (if any) and to notify the IRS of
the amount of interest paid to the obligor. The TIN is also used to complete the IRS Form 1099, which is
sent to the obligor as a record of interest paid in the amount of $600 or more annually for purposes of the
obligor’s income tax preparation.

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Generally, interest earned on bonds posted by non-resident alien obligors will have 30% of the
interest withheld under the backup withholding rules. If, however, the obligor completes Form W-8BEN
and claims that a lower rate of withholding applies based on a tax treaty, that information will be used to
calculate the tax withholding amount, which will be sent to FFMS at the time interest is paid to the
obligor. (Interest is paid only once at the time the bond is closed, breached, or cancelled.)
In the event the obligor does not provide a TIN, ICE will withhold 28% of the taxable annual
interest equal to or above $600 for obligors with a U.S. address, and 30% of any interest paid for obligors
with a foreign address.6

Retention
The retention period for BMIS is not changing as a result of this update. BMIS data is retained
for six years and three months after the bond is closed, breached, or cancelled. The IRS Forms W-9 and
W-8BEN are retained in File-On-Q for the same period as the BMIS data.

Internal Sharing and Disclosure
Internal sharing and disclosure of BMIS information are not changed with this update.

External Sharing and Disclosure
With this change, ICE will provide additional information to the IRS concerning income tax
withheld from interest payments to obligors. Specifically, ICE will provide to the IRS Form 945 to report
backup withholdings from interest payments to U.S. citizens and LPRs and Form 1042 to report backup
withholdings for non-resident aliens during each calendar year. Using user accounts issued to ICE BFC
personnel, ICE log on to the IRS FIRE System (Filing Information Returns Electronically) and transmit
this information electronically to the IRS. ICE will pay the withheld taxes to the IRS based on the
periodic reconciliation of BMIS Web Activity Reports and FFMS Standard General Ledger (SGL)
withholding reports using Treasury’s Electronic Federal Tax Payment System (EFTPS). At the time of
payment of withholding taxes to the IRS, no obligor specific information is transmitted to the IRS; only
the amount of the total tax payment is transmitted. The reconciliation between the tax liability and the tax
payments will be completed during the annual filing of IRS Forms 945 and 1042 with the IRS and the
issuance of the 1099INT and 1042S forms to the obligors. ICE electronically sends to the IRS the Form
1099INT and 1042S data, based on withholding information stored in BMIS Web, by logging on to the
IRS FIRE (Filing Information Returns Electronically) system.

Notice
At the time the obligor is posting the bond at an ICE field office, ICE officers will provide the
obligor with a “Notice to Cash Bond Obligors,” which asks the obligor to complete and mail the
appropriate IRS form to OFM. The notice instructs obligors which IRS form to complete, why ICE is
6

Before withholding monies from the interest payment, ICE will attempt to obtain the TIN from the obligor at least
two times by delivering a written notice to the obligor at the time the bond is posted and at the time the notice of
cancellation or breach is sent to the obligor. If the obligor does not comply with either request, only then will ICE
withhold monies from the interest payment. These procedures are required by and in compliance with IRS rules on
backup withholdings.

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collecting the information, and who to contact at IRS with questions about the forms. Both IRS forms
also have instructions and privacy notices that explain the IRS’s purposes and authorities for the
collection of the information, as well as how the payer of the income will use the information provided on
the form.

Individual Access, Redress, and Correction
The IRS forms provide the individuals with information about what to do if their tax status or
other information has changed, which may be relevant to the determination or calculation of backup
withholdings. Specifically, individuals are instructed to file a new form with the payer of the information.
Obligors would therefore be aware to refile the relevant IRS form with ICE should their information
become out of date or should they become aware of an error.
Individuals seeking notification of and access to any record contained in this system of records, or
seeking to contest its content, may submit a request in writing to:
ICE FOIA Officer
800 North Capitol Street, N.W.
5th Floor, Suite 585
Washington, D.C. 20528
Individuals may also submit requests by fax at 202-732-0310 or by email at ice-foia@dhs.gov.
Please see the ICE FOIA Office’s website for additional information (http://www.ice.gov/foia/index.htm).
If an individual believes more than one component maintains Privacy Act records concerning him or her
the individual may submit the request to the Chief Privacy Officer, Department of Homeland Security,
245 Murray Drive, S.W., Building 410, STOP-0550, Washington, D.C. 20528.

Technical Access and Security
Technical access and security have not changed with this update.

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Technology
There are no associated technology changes with this update.

Responsible Official
Lyn Rahilly
Privacy Officer
U.S. Immigration and Customs Enforcement
Department of Homeland Security

Approval Signature
Original signed and on file with the DHS Privacy Office
Mary Ellen Callahan
Chief Privacy Officer
Department of Homeland Security