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The IRS and the Treasury have published Final Regulations and Proposed Regulations under Section 871(m) of the Internal Revenue Code providing for the withholding of tax on payments under equity swaps and certain other equity-linked instruments that are contingent upon, or determined by reference to, U.S.-source dividends. The Final Regulations adopt with minimal changes the rules adopted in Temporary Regulations issued in 2012. Very generally, these rules require withholding on payments that are contingent on, or determined by reference to, U.S.-source dividends that are made to a non-U.S

SIFMA, CME Group, Inc., the North American Tax Committee of ISDA, and the Futures Industry Association (the "Associations") submitted comments to the U.S. Treasury Department and the IRS requesting guidance on the application of existing rules treating swap upfront payments that constitute "significant" non-periodic payments, as loans for federal income tax purposes. According to the letter, in the context of cleared and many uncleared swaps, a party receiving an upfront payment is not entitled to retain the payment, but rather must remit the payment as variation margin back to the payor of

The IRS plans to issue new proposed regulations in 2015 to deal with the tax treatment of swaps with contingent nonperiodic payment swaps. The IRS and Treasury are also expected to issue "in the very near term" final regulations under Section 871(m) of the Internal Revenue Code which requires taxes to be withheld on payments (or deemed payments) to non-U.S. persons of dividend equivalents on certain equity swaps and equity derivatives referencing U.S. stocks. The final regulations were originally targeted for issuance by the end of 2014 with an effective date of January 1, 2016, to allow