[Federal Register Volume 77, Number 170 (Friday, August 31, 2012)]
[Rules and Regulations]
[Page 53141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-21497]

Rules and Regulations
                                                Federal Register

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Federal Register / Vol. 77, No. 170 / Friday, August 31, 2012 / Rules 
and Regulations

[[Page 53141]]



Internal Revenue Service

26 CFR Part 1

[TD 9572]
RIN 1545-BK53

Dividend Equivalents From Sources Within the United States

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations; correcting amendment.


SUMMARY: This document amends temporary regulations relating to 
dividend equivalents for purposes of section 871(m) of the Internal 
Revenue Code (Code). The regulations affect nonresident aliens and 
foreign corporations that hold notional principal contracts (NPCs) 
providing for payments determined by reference to payments of dividends 
from sources within the United States.

DATES: Effective Date: These regulations are effective August 31, 2012.
    Applicability Date: For dates of applicability, see Sec.  1.871-

FOR FURTHER INFORMATION CONTACT: Mark E. Erwin or D. Peter Merkel at 
(202) 622-3870 (not a toll-free number).



    On January 23, 2012, the Department of the Treasury (Treasury) and 
the Internal Revenue Service (IRS) published in the Federal Register a 
temporary regulation and a notice of proposed rulemaking relating to 
dividend equivalents from sources within the United States. See TD 
9572, 77 FR 3108 (Temporary Regulations); REG-120282-10, 77 FR 3202 
(Proposed Regulations). Section 871(m)(2) defines the term ``dividend 
equivalent'' to include, in part, any payment made pursuant to a 
specified notional principal contract (specified NPC) that is 
contingent upon or determined by reference to a U.S. source dividend. 
Section 871(m)(3)(A) provides a definition for the term specified NPC 
that is applicable to payments made through March 18, 2012. Section 
1.871-16T(b) of the Temporary Regulations provides that the definition 
of specified NPC contained in paragraphs (i) through (iv) of section 
871(m)(3)(A) will apply to payments made after March 18, 2012, and 
before January 1, 2013. The Proposed Regulations provide a different 
definition of specified NPC that would apply to payments made on or 
after January 1, 2013.

Explanation of Provisions

    Treasury and the IRS received numerous comments on the Proposed 
Regulations, stating that the proposed effective date of January 1, 
2013, would not allow taxpayers sufficient time to build and test the 
systems required to implement the withholding rules for specified NPCs 
and equity-linked instruments. In response to these comments, this 
document amends Sec.  1.871-16T(b) of the Temporary Regulations so that 
the definition of a specified NPC contained in paragraphs (i) through 
(iv) of section 871(m)(3)(A) will apply to payments made after March 
18, 2012, and before January 1, 2014. When final regulations are issued 
adopting the Proposed Regulations, Treasury and the IRS intend that the 
rules contained in the final regulations will apply to payments made on 
or after January 1, 2014.
    Treasury and the IRS continue to consider the other public comments 
made on the Temporary Regulations and the Proposed Regulations.

Drafting Information

    The principal author of these regulations is D. Peter Merkel, the 
Office of Associate Chief Counsel (International). Other personnel from 
Treasury and the IRS participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:


Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.871-16T also issued under 26 U.S.C. 871(m).

Sec.  1.871-16T(b)  [Amended]

Par. 2. Section 1.871-16T(b) is amended by removing the language 
``2013'' and adding the language ``2014'' in its place wherever it 

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
    Approved: August 16, 2012.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2012-21497 Filed 8-30-12; 8:45 am]