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Wolters Kluwer Enhances Capital Changes 871M Automated Compliance Tool

Solution Helps Firms Meet Existing—and Pending—Regulatory Obligations 

Wolters Kluwer today announced the release of its enhanced Capital Changes 871M Automated Compliance Tool. The solution helps banks, brokers and other financial services firms comply with IRS rules already in place, in addition to new, complex regulatory changes that will go into effect January 1, 2019, based on IRS Notice 2017-42 relating to certain equity-linked financial derivatives.

Brokers and other U.S. withholding agents generally must already comply with a set of rules that went into effect January 1, 2017, relating to payments for certain equity-linked financial derivatives. However, the IRS released additional regulatory requirements regarding these financial instruments in January 2017 and again in August, adding important guidance. The financial consequences of failing to comply with these new requirements could be severe.

Complying with the complicated new U.S. withholding tax rules on non-cash changes in value to financial derivatives can be a difficult challenge for financial institutions,” said Stevie Conlon, Vice President, Tax and Regulatory Counsel, with Wolters Kluwer’s Investment Compliance business. “Our Capital Changes 871M Automated Compliance Tool is an industrial-strength solution designed to help financial institutions avoid costly errors in applying difficult new withholding tax rules. This is a capability that is especially crucial for firms, given the daily processing, batch file transfers, and high volumes of their customers’ activities.”

The Capital Changes 871M Automated Compliance Tool manages compliance with U.S. withholding and other reporting requirements regarding dividend equivalents on U.S. source derivative financial instruments sold to non-U.S. persons. Additionally, the tool solves challenging aspects of broker compliance for option contracts, as well as for certain similar contracts and thousands of tax lots by automatically:

  • Determining whether the rules apply to a particular contract;
  • Computing each dividend equivalent amount by tax lot for contracts subject to withholding; and
  • Finalizing the date and amount on which the withholding must occur for all dividend equivalent amounts determined for a particular tax lot.

The new version of Wolters Kluwer’s 871M Compliance Tool includes several important updates designed to help withholding agents comply with difficult aspects of the regulations that will be applicable in 2019, including:

  • Applying the dividend payment date election;
  • Applying the rules for omnibus accounts;
  • Applying the rules to additional asset classes; and
  • Applying the combination ordering rule within accounts

More information about Wolters Kluwer’s Capital Changes 871M Automated Compliance Tool is available here.

Wolters Kluwer Governance, Risk & Compliance (GRC) is a division of Wolters Kluwer which provides legal, finance, risk and compliance professionals and small business owners with a broad spectrum of solutions, services and expertise needed to help manage myriad governance, risk and compliance needs in dynamic markets and regulatory environments. 

Wolters Kluwer N.V. (AEX: WKL) is a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide.