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Treasury Issues Notice 2014-14

Revising effective date for imposition of gross tax on certain equity linked instruments under section 871(m)

In response to industry comments on proposed regulations §1.871-15 released on December 5, 2013 (78 FR 73128 (2013)), Treasury and the Internal Revenue Service have issued
Notice 2014-14, effective March 4, 2014, to push back the effective date for specified equity linked instruments (ELIs) to which dividend equivalent amount treatment and gross basis tax may be imposed under IRC section 871(m). The originally announced effective date provided that gross basis tax was to apply for payments made on or after January 1, 2016 with respect to specified ELIs acquired on or after March 5, 2014. (See United States Alert dated December 6, 2013 for discussion.) Pursuant to IRS Notice 2014-14, the gross basis tax will only apply to ELIs issued on or 90 days after the date of publication of the final regulations. These changes are to be implemented through amendment to §1.871-15(e) when the regulations are finalized. The December 2013 proposed regulations continue to define the scope of specified ELI characterization and include contingent and convertible bonds that meet or exceed the 0.7 delta testing requirements on the date such instruments are acquired. The coordinated withholding tax provisions issued with proposed §1.871-15 remain proposed without change.

The Notice solicits written or electronic comments on the change to the 2013 proposed regulations.

Contact information

For additional information or questions, please contact:

Ted Dougherty
National Managing Partner, Investment Management Tax
Deloitte Tax LLP
+1 212 436 2165
  Paul Epstein
Deloitte Tax LLP
+1 202 758 1390
Craig Gibian
Deloitte Tax LLP
+1 202 220 2637
  Jeff O'Donnell
Deloitte Tax LLP
+1 202 879 4932


This alert contains general information only and Deloitte is not, by means of this alert, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This alert is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this alert.

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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