Navigating Corporate Actions

Compass, a companion service to Capital Changes Daily products, alerts you to the important corporate actions events of the day. Think of Compass as your own team of highly qualified experts reviewing the daily corporate actions and giving you a prioritized list for immediate action.

No matter how many staff members are devoted to monitoring corporate actions and regardless of the processes in place, the task can be daunting. With the increasing volume and complexity of corporate actions there is always the chance that a transaction can be missed or inaccurately booked.

Compass helps in the correct identification, accurate analysis and timely processing of corporate action events by identifying:

Action Required by a shareholder or portfolio manager

• Includes election and consent fee deadlines, notices of shareholder votes, as well as expiration dates of tender offers.

Special Concerns that need to be addressed

• Including events indicating possible determination of stock worthlessness, alternative merger structures resulting in different tax consequences, FIRPTA and PFIC issues, availability of fair market values or basis allocations, bankruptcy filings and liquidations, availability of non-U.S. jurisdictions' tax consequences, and any other circumstance needing special attention.

IRC Section 302 issues that must be resolved

• IRC Section 302 issues, which affect taxability and can result in different tax treatment for different shareholders.

Potentially Taxable Transactions (U.S. and International)

• U.S. and International transactions which are potentially taxable or for which is taxability uncertain or unknown are alerted.

Together, Compass and the Capital Changes daily products provide a thorough and timely analysis of U.S. and International corporate actions, focusing on the tax consequences to shareholders. Compass is delivered each afternoon directly to your e-mail inbox. The newsletter's PDF format makes it easy to print for review.

Code Section 302 Alert

Many firms are struggling with the growing complexity of compliance with Internal Revenue Code Section 302, which is of immediate concern to firms that must withhold US tax on payments to non-resident aliens, and potentially of interest to firms that send out 1099s to US residents. In brief:

• Section 302 sometimes determines whether cash received in a corporate action is to be treated as a dividend (taxable as ordinary income), or as a sale or exchange (taxable as capital gain/loss).
• Dividends paid by US firms to non-resident aliens can be subject to US withholding tax, meaning the paying agent must withhold up to 30% of the dividend as federal tax, unless a treaty applies lower rate.
• Under recently proposed IRS Regulations, concerns are now heightened regarding the proper withholding procedures.
• Firms that have foreign clients are liable for all withholding taxes they are required to collect.

Compass includes a dedicated section covering daily corporate actions that raise Section 302 issues, which enables your firm to focus on this area and minimize risk.

For more information, click on the link below:

• Capital Changes - Compass Sample Data