The IRS on March 4 issued Notice 2014-14, 2014-13 I.R.B. 1, which announced a change for the application of proposed regulations under Section 871(m).
Specifically, the notice provides that Section 871(m), which provides that a dividend equivalent is treated as a dividend from sources within the United States for purposes of Sections 871(a), 881 and 4948(a), will not apply to specified equity-linked instruments (ELIs) until 90 days after proposed regulations (REG-120282-10) are finalized.
Those proposed regulations were issued simultaneously with final regulations (T.D. 9648) on Dec. 5, 2013, related to dividend equivalents. Among other things, the proposed regulations provide that a dividend equivalent includes any payment from a specified ELI. An ELI includes a futures contract, forward contract, option, debt instrument or other contractual arrangement that references the value of one or more underlying securities.
For payments made on or after Jan. 1, 2016, Proposed Treas. Reg. Section 1.871-15(e) provides that the definition of specified ELI include certain ELIs acquired on or after March 5, 2014.
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