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Proposed Regulations Under Code Section 871(m) (REG-120282-10)

OCC filed this comment letter in connection with the IRS' proposed regulations under Section 871(m) of the tax code, which impose U.S. withholding tax on dividend equivalents if the option is held by a non-U.S. person and had an initial delta of 70 or higher at the time it was issued. In the letter, OCC expresses full support for the letter previously submitted by the U.S. Securities Markets Coalition (comprised of all of the major options exchanges in the United States and OCC) on the proposed regulations. OCC also recommends that IRS and Treasury convene a roundtable of interested market participants to discuss the costs, burdens and adverse consequences of the proposed regulations and to identify more practical approaches to meeting the policy objectives underlying section 871(m), and that if this course is not followed, that IRS and Treasury issue the next iteration of the regulations in proposed form so that market participants have an opportunity to comment before the revised regulations are issued in final form. In addition, OCC provides specific comments aspects of the proposed regulations that could directly affect OCC's ability to function efficiently in its critical role as the clearing organization for all U.S. options exchanges as well as several U.S. futures exchanges, including recommendations to IRS and Treasury about clarifying which market participant will have the obligation to determine if a transaction is subject to section 871(m) and the amount of any dividend equivalents.

This web site discusses exchange-traded options issued by The Options Clearing Corporation. No statement in this web site is to be construed as an endorsement, recommendation or solicitation to purchase or sell a security, or to provide investment advice. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of the disclosure document, Characteristics and Risks of Standardized Options. Individuals should not enter into option transactions until they have read and understood this document. To obtain copies, contact your broker, any exchange on which options are traded, or The Options Clearing Corporation, 125 S. Franklin Street, Suite 1200, Chicago, IL 60606 ([email protected]).