Section 871(m) of the Internal Revenue Code treats “dividend equivalent
amounts” from certain specified swaps and equity-linked instruments as U.S.
source income subject to withholding if paid to a non-U.S. person. The Treasury
has been attempting to draft rules that would define what types of swaps and
equity-linked instruments would be impacted by these rules and provide further
guidance on determining the dividend equivalent amount.
After withdrawing an initial set of proposed rules that were issued in 2012, the
Treasury issued a new set of proposed Section 871(m) regulations in December
2013. This brown bag is intended to be a discussion of the current developments
under Section 871(m), focusing on the newly proposed