Notice 2014-14 - “Specified ELI” to be limited in final regulations under section 871(m) 

March 4:  The IRS today released an advance copy of Notice 2014-14 stating that when final regulations under section 871(m) are issued, the term “specified ELI” (specified equity- linked instrument) will be limited to those ELIs issued 90 days after publication of the final regulations.

Read Notice 2014-14 [PDF 13 KB]


In early December 2013, Treasury and the IRS released final regulations (T.D. 9648) and, by cross-reference, proposed regulations (REG-120282-10) as guidance for nonresident aliens and foreign corporations that hold certain financial products that provide for payments contingent upon or determined by reference to the payment of dividends from sources within the United States.

Read more about the 2013 regulations: TaxNewsFlash-United States [PDF 186 KB]

The 2013 proposed regulations:

  • Included new rules for determining whether a transaction is subject to tax under section 871(m) (i.e., dividend equivalent is treated as a dividend from sources within the United States)
  • Provided that a dividend equivalent includes any payment pursuant to a “specified notional principal contract” (specified NPC) or a “specified equity-linked instrument” (specified ELI) that references the payment of a dividend from an underlying security

According to the 2013 proposed regulations, an ELI would only be a specified ELI if the “long party” acquired it on or after March 5, 2014.

Notice 2014-14

Comments made in response to the 2013 proposed regulations recommended that an ELI issued prior to January 1, 2016, not be treated as a specified ELI or, alternatively, that an ELI not be treated as a specified ELI if it is issued prior to the date that the final regulations are published.

The comments noted that:

  • The 2013 proposed regulations significantly expanded the scope of ELIs that would be subject to tax pursuant to section 871(m).
  • This expansion would create uncertainty in pricing transactions today and would not give market participants sufficient time to implement the systems necessary to track the information required by the 2013 proposed regulations by March 5, 2014.

In response, Notice 2014-14 states that Treasury and the IRS intend to amend the term “specified ELI” in the final regulations, so that the term “specified ELI” is limited to ELIs issued on or after 90 days after the date of publication of the final regulations.

Notice 2014-14 is effective March 4, 2014.

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this


Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.

Email your contact information.

TaxNewsFlash-United States by year