IRS Finalizes Rule On Financial Products Referencing U.S. Source Dividend Payments

The IRS clarified requirements as to "certain financial products providing for payments that are contingent upon or determined by reference to U.S. source dividend payments." In addition, the IRS removed related temporary rules.

According to the IRS, the "Dividend Equivalents from Sources within the United States" final rule will:

• define the term "broker" under IRS code section 871(m);
• provide guidance on calculations of deltas of foreign regulated exchange-listed options; and
• help identify the party responsible for determining whether a trade is a section 871(m) transaction when multiple broker-dealers are involved.

The IRS stated that the final rule was adopted without any substantial change to the 2017 rule proposal. However, the Treasury and IRS are continuing to consider possible amendments to section 871(m) provisions to align with Executive Order 13789, which requires the Treasury to review certain significant tax regulations that impose an undue