March 13, 2023

Ms. Erika Nijenhuis
Senior Counsel, Office of Tax Policy
U.S. Department of the Treasury
1500 Pennsylvania Ave, NW
Washington, DC 20220

Mr. John Sweeney
Office of Associate Chief Counsel, International
Senior Technical Reviewer
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Mr. Subin Seth
Office of Associate Chief Counsel, International
Senior Counsel
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Re: 2023 Qualified Intermediary Agreement

Dear Ladies & Gentlemen:

The Securities Industry and Financial Markets Association (“SIFMA”)1 would like to thank the Internal Revenue Service (the “IRS”) for issuing Revenue Procedure 2022-43, providing the final qualified intermediary (“QI”) withholding agreement (the “Agreement”). SIFMA takes this opportunity to propose several recommendations for the Treasury Department and the IRS to consider in order to clarify certain provisions in the Agreement.

(1) Clarification Regarding Reliance on Good Faith for IRC Section 871(m)

SIFMA requests clarification regarding the requirements for a QI and a QI acting as a qualified derivatives dealer (“QDD”) to disclose in its periodic certification any IRC Section 871(m) transactions for which the QI or QDD relied on the good faith standard under section 10.01(C) of the Agreement. Section 10.01(C) of the Agreement sets forth the requirements for a QI and QDD to comply under a good faith effort standard with IRC Section 871(m) during the extended phase-in period for calendar years 2023 to 2025. With respect to a QDD, the Agreement provides that a QDD is only required to certify that it made a good faith effort to comply with the IRC Section 871(m) regulations and the relevant provisions of the Agreement. However, in closing, section 10.01(C) of the Agreement states, “For any reliance on the good faith standard, the QI must disclose any Section 871(m) transactions included in the review that the QI believes should be subject to the good faith standard for purposes of reporting the factual information with its periodic certification and include a brief description of the reason QI relied on the good faith standard, how the QI will address it, and why the good faith standard should apply.” SIFMA requests confirmation that the requirement to disclose and describe any IRC Section 871(m) transactions for which the good faith standard was relied upon applies only to a QI, but not a QI acting as a QDD, and clarification as to whether that disclosure must be made on a transaction-by-transaction basis or should more generally identify the type of activity (e.g., documentation, reporting) for which good faith efforts applied.

 

1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).