IRS defers effective date for section 871(m) regulations

On 4 August 2017, the Internal Revenue Service (IRS) and the US Department of the Treasury published Notice 2017-42 which defers the effective date for portions of the regulations under Section 871(m) of the Internal Revenue Code for another year. The Notice extends the relief provisions currently in effect under Notice 2016-76, Rev. Proc. 2017-15, and the 2017 Section 871(m) regulations. The Notice provides:

  • that transactions in-scope based on their delta through the end of 2018 are limited to ‘delta one’ transactions; as a result, transactions with a delta less than 1 but greater that .8 (delta .80 transactions) will not be in scope until 1 January 2019,
  • that the simplified combination rule will continue to apply for withholding agents until 31 December 2018,
  • for the deferral of withholding on actual and deemed dividends paid to qualified derivatives dealers (QDDs) until 1 January 2019 and
  • for the extension of the good faith periods for the implementation of Section 871(m).

PwC Observation: The deferral provided by Notice 2017-42 has been anticipated by market participants who have been struggling to implement the guidance issued at the end of 2016 and the beginning of 2017. In particular, the changes to the Qualified Intermediary (QI) Agreement applicable to QDDs have raised significant questions for issuers of financial products linked to US equities in the international financial markets.

For more information, please refer to our

PwC Tax Insights Publication


Should you have any further questions, please contact one of the following persons:

Christoph Schaerer
+41 58 792 4282

Melanie Taosuwan
+41 58 792 4249

Thomas Plank
+41 58 792 4584

Published by

Melanie Taosuwan

Melanie Taosuwan

Melanie Taosuwan is a Tax Director in the Financial Services practice at PwC. Melanie is the Swiss FATCA, QI and Section 871(m) Knowledge Manager and has more than five years of experience in supporting and advising Swiss financial institutions on these topics.