IRS again extends Section 871(m) transition relief for dividend equivalent payment rules through 2028

In extending the relief, Notice 2026-61 provides two clarifications:

• While the Notice continues to provide that a qualified derivatives dealer (QDD) will not be subject to tax on dividends and dividend equivalents received in 2027 and 2028 in its equity derivatives dealer capacity or to withholding on those dividends (including deemed dividends), the Notice now expressly conditions this relief on the QDD identifying the dividends received in its equity derivatives dealer capacity on its withholding statement in the same manner required under the qualified intermediary agreement set forth in Revenue Procedure 2022-43 (i.e., the 2023 qualified intermediary agreement). While this appears to clarify, rather than add to, the requirements already applicable under prior guidance, QDDs seeking to rely on the extended relief should nevertheless ensure that such identification is made.
• Prior Notices provided that withholding agents could apply the qualified securities lender transition rules described in Notice 2010-46, Part III, to payments made from 2018 through 2026. In extending this relief through 2028, Notice 2026-61 clarifies that this relief applies only to Parts III.C, III.D, and III.E of Notice 2010-46.

Apart from these clarifications and the updated dates, Notice 2026-61 generally continues the relief provided by Notice 2024-44 for tax years 2027 and 2028 without substantive change.

___________

If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.