The IRS today released an advance version of Notice 2018-05 that permits withholding agents to apply transition rules from Notice 2010-46 for payments made in calendar years 2018 and 2019.
Notice 2010-46 provided a solution to the problem of over-withholding on a chain of dividends and dividend equivalents by, in part, providing an exception from withholding for payments to a qualified securities lender (QSL). The QSL regime requires that a person agreeing to act as a QSL must comply with certain withholding and documentation requirements. The IRS permitted withholding agents to rely on transition rules under Notice 2010-46, Part III, until guidance was developed that would include documentation and substantiation of withholding.
Subsequently, the IRS and Treasury Department issued guidance—including Rev. Proc. 2017-15, setting forth the final QI Agreement (qualified intermediary agreement). That guidance also provided that taxpayers could rely on Notice 2010-46 during calendar year 2017. Read TaxNewsFlash-United States
Notice 2018-05 [PDF 15 KB], as released today, explains that in response to comments received, the QSL regime is being extended for a longer transition period. Today’s notice extends the QSL regime under Notice 2010-46, Part III, “but only for payments made in calendar years 2018 and 2019.”
Today’s notice also states that during the extended period, the IRS and Treasury intend to consider whether additional guidance is appropriate to address foreign lenders of U.S. dividend-paying stocks.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.