IRS Provides Transitional Relief for Some Stock Basis Reporting Requirements

February 22, 2011

On Tuesday, the IRS provided transitional relief from the information reporting requirements that apply to issuers of stock regarding organizational actions that affect stock basis (Notice 2011-18).

 

IRC § 6045B, enacted by the Energy Improvement and Extension Act of 2008, PL 110-343, instituted a number of new information reporting requirements for issuers of stock, stockbrokers and mutual funds. One of the new requirements is that, for organizational actions beginning in 2011, an issuer of stock must report to the IRS any organizational action (such as a stock split, merger or acquisition) that affects the stock’s basis.

 

When an organizational action occurs, the issuer generally must report the action to the IRS by filing a return within 45 days. The issuer must also furnish a corresponding statement to each nominee of the stockholder (or to each stockholder if there is no nominee) by Jan. 15 of the following year. Under regulations issued last year, instead of filing a return with the IRS within 45 days, the issuer can post the return to its website (Treas. Reg. § 1.6045B-1(a)(3)).

 

The IRS has not yet developed the return for issuers to use to report organizational actions or determined what information will be required on the return. As a result, the IRS is waiving the penalties under section 6721 for a failure to file an issuer return within 45 days of an organizational action taken in 2011, provided that the issuer files the issuer return with the IRS (or posts the return on its website as provided in the regulations) by Jan. 17, 2012.

 

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