The US Treasury Department and the US Internal Revenue Service (IRS) issued final regulations (TD 9887) on certain financial products providing for payments that are contingent upon or determined by reference to US source dividend payments. The final regulations are scheduled to be published in the Federal Register on 17 December 2019.
The final regulations provide: (i) guidance defining the term "broker" for purposes of section 871(m) of the US Internal Revenue Code (IRC); (ii) guidance related to when the delta of an option that is listed on a foreign regulated exchange may be calculated based on the delta of that option at the close of business on the business day prior to the date of issuance; and (iii) guidance identifying which party to a "potential section 871(m) transaction" is responsible for determining whether a transaction is a "section 871(m) transaction" when multiple brokers or dealers are involved in the transaction.
The final regulations adopt the proposed regulations (REG-135122-16) that were published on 24 January 2017 without any substantive change.
The final regulations will be effective from 17 December 2019.
The proposed regulations are designated Treasury Regulation section 1.871-15.