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IRS Rule 302 — Industry Operational Challenges

Brian GoldmanManaging Director, US Securities Operations

JPMorgan Chase Bank, N.A.

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IRS Rule 302 — Industry Operational Challenges

Challenges of IRS Rule 302

Client Expectations

IRS Expectations

What DTCC Participants must do to meet the 302 challenges

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Taxpayer Perspective of What is Owed in Taxes

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IRS Perception of What is Owed in Taxes

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Securities Industry Perspective of Servicing Taxes

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Challenges of IRS Rule 302

Multiple Event Types

Event by event confirmation process

Timing of Information

Monitoring requirements throughout the life of corporate events

Lack of Industry Standards

Non-standard processes and communication

Eligibility Rules

Always, Sometimes, Never

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Client Expectations

Identification of taxability at the time of Corporate Action announcement

Tax consequence critical to investment decisions

Confirmation of IRS Rule Applicability

Conflict of Information Resolution

Reporting and Tracking of 302 Events

Surprise elimination

Prompt refund of NRA Tax Withholding when appropriate

Reinvestment Opportunities

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IRS Expectations

302 Proceeds reported as Income by Custodians

35% Tax Withholding

NRA Tax Withholding by Custodians

Non-US Beneficial and Majority Shareholders

Tender Certification Forms

302 Tax Withholding Avoidance or Refund

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What DTCC Participants Must do to Meet the 302 Challenges

Education

DTCC Participants and Staff

Industry Participation

Improvement in the 302 process is everyone’s responsibility

System Enhancements

Automation Opportunities

Account Coding

Process & Control Improvement

End to End Reviews

Inter-department Coordination

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