June 12, 2017

By Electronic Mail ([email protected])

Internal Revenue Service
CC:PA:LPD:PR (Notice 2017-09)
Room 5205
P.O. Box 7604
Ben Franklin Station
Washington, DC 20224

Re: Notice 2017-09 – De Minimis Error Safe Harbor to the I.R.C. §§ 6721 and 6722 Penalties

To Whom It May Concern:

The Securities Industry and Financial Markets Association (“SIFMA”)1, whose members manage nearly 80 percent of all U.S. broker-dealer client assets and more than 50 percent of investment advisor assets under management, appreciates the opportunity to comment on the Internal Revenue Service’s (“IRS”) Notice 2017-09 (the “Notice”). The advance Notice provides guidance to implement changes made by the Protecting Americans from Tax Hikes Act of 2015 (the “Path Act”)2 on the de minimis error safe harbor from information reporting penalties under Internal Revenue Code (the “Code”) sections 6721 and 6722 and the payee election to have the safe harbor not apply. 3 It also announces that the U.S. Department of the Treasury (“Treasury”) and the IRS intend to issue regulations under sections 6721 and 6722, and to the extent that the regulations incorporate the rules contained in the Notice, the regulations will be effective for returns required to be filed, and payee statements required to be furnished, after December 31, 2016.

We believe that in crafting the final regulations, the Treasury and the IRS should be guided by the President’s two Executive Orders 4 on reducing regulations as well as the core principles for regulating the U.S. financial system. Both require that federal agencies, in reviewing enacted and proposed regulations, ensure that costs and other burdens “…associated with the governmental imposition of private expenditures required to comply with Federal regulations” are prudently managed to comply with the policies of the executive branch.5 Further, in the spirit of the President’s Executive Orders, rules implementing enacted regulations should not negate the benefits of such regulations.

The comments below point out problems with certain aspects of the proposed rules that, if implemented, would not only contradict the spirit of the President’s Executive Orders, but also Congressional intent behind the Path Act’s safe harbor of reducing the burdens on taxpayers, information filers, and the IRS about de minimis error corrections. 6 The system framework needed to support all the data for the elections made pursuant to the proposed regulations would be an intensive undertaking for the industry, and would require more resources than maintaining the current state of issuing de minimis error corrections. We offer suggestions to prevent this from occurring. We also request guidance on elections for joint accounts.

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1 SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.

2 Protecting Americans from Tax Hikes Act of 2015, Pub. L. No. 114-113, div. Q (Dec. 18, 2015), 129 Stat. 3040 (codified in scattered sections of 26 U.S.C.).

3 I.R.S. Notice 2017-09, IRB 2017-4 (Jan. 23, 2017); see also 82 Fed. Reg. 17522 (Apr. 11, 2017) (for extension of comment period to June 12, 2017).

4 Exec. Order No. 13771, 82 Fed. Reg. 9339 (Feb. 3, 2017); Exec. Order No. 13772, 82 Fed. Reg. 9965 (Feb. 8, 2017).

5 Exec. Order No. 13771, 82 Fed. Reg. 9339.

6 To get a sense of the importance of the benefits of the safe harbor provision, SIFMA surveyed its members and found that, for example, one of our members files nearly 6 million forms per year, and a significant number of those result in corrections.