Notice 2017-42 and Notice 2018-72 announced that the Treasury Department and

the IRS intend to amend §§1.871-15(q)(1) and (r)(3), and 1.1441-1(b)(4)(xxii)(C) to provide that a QDD will not be subject to tax on dividends and dividend equivalents received in 2017 through 2020 in its equity derivatives dealer capacity or withholding on those dividends (including deemed dividends). This Notice announces that the Treasury Department and the IRS intend to amend those provisions to provide that a QDD will not be subject to tax on dividends and dividend equivalents received in 2021 and 2022 in its equity derivatives dealer capacity or withholding on those dividends (including deemed dividends) as well.

Section 4.01(1) of Rev. Proc. 2017-15 provides that a QDD will be required to compute its section 871(m) amount using the net delta approach beginning in 2018. Notice 2017-42 and Notice 2018-72 provided that a QDD would be required to compute its section 871(m) amount using the net delta approach beginning in 2021. This Notice provides that a QDD will be required to compute its section 871(m) amount using the net delta approach beginning in 2023.

A QDD will remain liable for tax under section 881(a)(1) on dividends and dividend equivalents that it receives in any capacity other than as an equity derivatives dealer, and on any other U.S. source FDAP payments that it receives (whether or not in its equity derivatives dealer capacity). In addition, a QDD is responsible for withholding on dividend equivalents it pays to a foreign person on a section 871(m) transaction, whether acting in its capacity as an equity derivatives dealer or otherwise.

Finally, section 10.01(C) of the 2017 QI Agreement provides that: “For calendar year 2017, a QDD is not required to perform a periodic review with respect to its QDD activities (as otherwise required by section 10.04 of this Agreement) or

provide the factual information specified in Appendix I.” Notice 2017-42 and Notice 2018-72 provided that a QDD is not required to perform a periodic review with respect to its QDD activities for 2017 through 2020. This Notice provides that a QDD is not required to perform a periodic review with respect to its QDD activities for 2021 or 2022. Note that a QDD must use the same year for the periodic review of its QI activities and its QDD activities. A QI that is a QDD must choose 2023 or a later year within its certification period in which to perform its periodic review unless its applicable certification period ends in 2022 or an earlier year.

VI. EXTENSION OF TRANSITION RULES FROM NOTICE 2010-46