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Global Tax ForumIan DeSacia, DTCC Director, Matching, Settlement & Asset Services, leads a panel discussion on complying with IRS Code section 302

The Depository Trust & Clearing Corporation’s (DTCC) 17th Annual Global Tax Forum — held this year on Friday, April 15th — featured a range of interactive discussions on the latest developments in foreign and domestic tax laws.

The 120 DTCC clients in attendance heard presentations from various tax experts representing a wide range of industry organizations, such as banks and leading tax information services.  Discussions on how firms are approaching challenges related to Sections 302, 305(c) and foreign withholding tax.

The half-day program, held at India House in lower Manhattan, was sponsored by DTCC’s Settlement & Asset Services’ Global Tax business, with a post-event networking luncheon sponsored by Globe Tax Services, Inc.

Cracking the Tax Code: Discussions on Sections 302 and 305

The first panel, moderated by Ian DeSacia, Director, Matching, Settlement & Asset Services, DTCC, featured Dana Pasricha, Vice President, Asset Services, Brown Brothers Harriman; Ellis Levy, Executive Director, Tax Counsel & Tax Planning, DTCC; and Steve O’Boyle, Senior Vice President, Information Reporting and Withholding, Citigroup.

Related: DTCC Global Tax Services

The panel discussed challenges of Internal Revenue Code (IRC) Section 302 and the best practices for firms to comply with tax withholding obligations on payments to non-resident accounts that are subject to Section 302. Section 302 determines whether the distribution should be treated as a dividend or as a redemption of stock and therefore not subject to withholding tax.  The panel discussed the challenges of making this determination which is required on a shareholder by shareholder basis.  One of the hurdles is obtaining the number of shares outstanding so that shareholders can calculate their ownership percentage which is needed for the determination on how the distribution is treated.

Nicole Tanguy, Director and Tax Counsel, Citigroup Inc. presented later in the morning on the recently published proposed regulations under IRC Code 305(c). She discussed implications on operational difficulties of identifying and processing of deemed dividends to holders of convertible securities and warrants.  Nicole pointed out that the proposed regulations would require an issuer to report a deemed dividend distribution that affects tax basis by filing an issuer statement on Form 8937 with the IRS or publish the applicable information on its corporate website. Issuers are also required to furnish a copy of the issuer statement to each record holder of specified securities or their nominees by January 15 of the following year, unless the public reporting requirement is met.

Other Sessions Covered EU, Complex Debt and Foreign Tax

  • Another session of the event featured Michalis Sotiropoulus, Director for Government Relations, Europe, DTCC, who provided an update on EU financial reform, especially the challenges of cooperation among EU member states regarding a financial transaction tax.  Michalis noted that there are still many open questions and issues that would have to get resolved, such as what instruments are in scope, tax collection, remittance processes, and resolution of the extraterritoriality issue
  • Justin Hopkins, Director, Regulatory Affairs; Tax Data Services, from Broadridge Financial Solutions Inc., spoke on the challenges associated with complex debt, 1099 and cost-basis reporting.
  • Nardeo Ganesh, Executive Director, Matching, Settlement & Asset Services, DTCC, and Len Lipton, Managing Director, Globe Tax Services, Inc., discussed global withholding and tax reclamation trends.
  • Greggory Lewis, Senior Vice President of Depositary, CSD and Issuer Services, Globe Tax Services, Inc., presented several of Globe Tax’s recent system enhancements, as well as market updates from Germany, Mexico and Puerto Rico.