SIFMA Submits Comments to IRS and Treasury on Application of PFIC Shareholder Reporting Requirements to Securities Dealers

SIFMA provided comments and suggested changes to the IRS and the U.S. Treasury Department ("Treasury") regarding the 2014 temporary and related proposed regulations under Section 1298(f) of the Internal Revenue Code ("IRC"), which requires shareholders of passive foreign investment companies ("PFICs") to file with its annual tax return an information return on Form 8621 with respect to each PFIC in which it holds a direct or indirect shareholder interest.

SIFMA requested that the temporary and proposed regulations be modified to provide that they do not apply to securities held by dealers in securities and other taxpayers that mark those securities to market under Section 475 of the IRC, because such taxpayers are generally exempt from PFIC tax consequences. Securities dealers and other taxpayers that mark to market securities under Section 475 must report any gain or loss on their securities each year, and such gain or loss is ordinary. Thus, taxpayers subject to mark-to-market treatment cannot take advantage of the potential deferral or potential capital gain treatment available by investing in non-U.S. securities, which the PFIC provisions are intended to discourage. Moreover, such reporting obligation, in SIFMA's view, would impose significant burdens on dealers in securities with no tax policy reason to do so.

See: SIFMA Comment Letter.For more information, please contact Daniel Mulcahy and Mark Howe.