Subscribe to the Tax Headline RSS feed | Subscribe to the Tax Headline feed via EmailBNA INSIGHTS: When the Other Shoe Falls: IRS Notice 2010-46 Restricts the Application of Notice 97-66 for Cross-Border Securities Loans
June 3, 2010 in Daily Tax Report · Leave a Comment
Notice 97-66 created an opportunity for non-U.S. financial institutions to participate in the securities lending markets for stocks of U.S. corporations without suffering burdensome U.S. federal withholding taxes.
Congress perceived, however, that the withholding tax relief provided by Notice 97-66 created an opportunity for an avoidance of such withholding taxes. The first shoe fell in March, when Congress repealed Notice 97-66, effective for substitute dividend payments made on or after Sept. 14, 2010. The other shoe fell May 20 when the Internal Revenue Service (IRS) released Notice 2010-46. Notice 2010-46 substantially restricts the application of Notice 97-66 effective immediately, that is, for substitute dividend payments made on or after May 20, 2010. Notice 2010-46 also provides relief from cascading withholding in limited circumstances.
This article describes the new notice and its effect on both pre- and post-Sept. 14, 2010, securities lending transactions.
