by Michael Scholl
The impending federal requirement for firms to begin reporting cost basis information to investors and the Internal Revenue Service was one of the main topics of discussion at DTCC’s 11th Annual Global Tax Forum, held in New York on April 23.
Approximately 140 tax professionals attended the half-day forum, including representatives from Bank of America Merrill Lynch, Bank of New York Mellon, BNP Paribas, Credit Suisse, Citigroup, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Pershing LLC.
Cost basis snapshot
The cost basis reporting mandate, which will apply to securities transactions reported on Form 1099-B, is contained in a provision of the 2008 Emergency Economic Stabilization Act.
The requirement will be phased in, with securities subject to cost basis reporting on the following schedule.
- Jan. 1, 2011: Stock in a corporation acquired on or after this date.
- Jan. 1, 2012: Shares in mutual funds and dividend reinvestment plans acquired on or after this date.
- Jan. 1, 2013: Debt, options and other securities acquired on or after this date.
Benefits of CBRS
One certainty is that firms will be required to transfer cost basis information whenever they pass along assets to another firm. That’s why DTCC is enhancing its existing Cost Basis Reporting Service (CBRS) to accommodate such transfers, according to Lydia Midwood, DTCC product manager, Equities Clearance and Settlement, who gave a presentation on CBRS along with Thomas Sakaris, DTCC vice president, Equities Clearance and Settlement.
"The enhancements we’re building leverage the foundation we already have in place," said Midwood, who noted that the existing version of CBRS is used by firms that voluntarily wish to transfer cost basis information.
Midwood explained that the increased capacity of the enhanced CBRS will allow the service to handle transfers not made through DTCC’s Automated Customer Account Transfer Service (ACATS). In the past, the use of CBRS was limited to transfers made through ACATS, but with the cost basis reporting requirement on the horizon, the financial industry asked DTCC to expand CBRS to cover both ACATS and non-ACATS transfers.
Slate of speakers
Other presenters at this year’s forum were:
- Chris Steeves, partner, Fasken Martineau DuMoulin LLP, who discussed how Canada’s compulsory acquisition rules impacted Pan American Silver’s recent acquisition of Aquiline. He also talked about recent changes to the regulations governing Taxable Canadian Property.
- Elaine Marino, managing director, KPMG, who updated attendees about the efforts of the Organization for Economic Cooperation and Development (OECD) to create standards for the exchange of tax information and spoke about the OECD’s proposed framework for a streamlined relief-at-source mechanism.
- Nicole Tanguy, director and tax counsel at Citigroup Global Capital Markets, Inc., who provided a technical overview of the proposed IRS regulations intended to govern cost basis reporting.
- Len Lipton, director, Globe Tax Services Inc., who reported on developments in the non-U.S. tax area. This included the recent relocation of several corporations in response to the U.S. government’s heightened scrutiny of the "tax haven" countries where they were formerly domiciled, as well as upgrades to the system it operates on behalf of the depositaries to facilitate withholding tax relief on ADRs.
- Steve Neiss, vice president, Broadridge Financial Solutions, Inc., who discussed recent tax reporting news and how the extended deadline for providing tax information to customers impacted mutual funds during the recent tax season.
- Nardeo Ganesh, DTCC director, Tax Services, who provided an overview of DTC’s TaxRelief. This service enables DTCC customers to secure relief from international withholding taxes in 19 markets for themselves and their customers. TaxRelief delivers more than $2 billion worth of tax benefits to customers annually, and is offered through The Depository Trust Company, a DTCC subsidiary.
- Ian DeSacia, DTCC product manager, Tax Services, who reported on recent enhancements to DTC’s Canadian TaxRelief service.
- Roxana Argintescu, DTCC product manager, Asset Services, who discussed the upcoming Elective Dividend Service instruction approval process and provided an update on DTCC’s efforts to reengineer its core systems and develop a unified platform for all corporate actions announcements and processing.
Feedback from attendees was positive. In a follow-up survey, 94% of the respondents said they planned to attend next year’s Tax Forum, and 98% said they would recommend the forum to colleagues. @