Notice 2017-42 Delays Difficult | Wolters Kluwer
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  • Notice 2017-42 Delays Difficult Sec. 871(m) Rules Until 2019, Challenges Remain

    Stevie D. Conlon and Robert Schwaba

    Published October 12, 2017

    On August 4, 2017, the IRS issued Notice 2017-42 (the “Notice”), which delays three key aspects of Sec. 871(m) regulatory compliance until January 1, 2019: (1) the application of withholding to equity-linked instruments (“ELIs”) with a delta (defined below) of between 0.8 and 1.0; (2) the full “combination rule” set forth therein; and (3) the related rules for Qualified Derivatives Dealers (“QDDs”).  Section 871(m) imposes U.S. withholding tax on swaps, other notional principal contracts and equity-linked derivative contracts in connection with dividends paid on related U.S. stocks.

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