Wolters Kluwer Financial Services Helps Securities Firms Simplify Corporate Actions Compliance Challenges

Waltham, MA - 14 June 2012

New Tools Help Determine Taxability of Foreign and Domestic Corporate Actions to Meet Cost Basis Reporting Law Requirements

While the cost basis reporting law has created a number of new requirements for brokerage firms and fund companies, those related to determining the tax consequences of corporate actions, such as mergers, spinoffs and dividends, are among the most complex. To help firms maintain compliance with the law, Wolters Kluwer Financial Services is helping tax, legal and operations professionals who are responsible for corporate actions processing identify and address challenges up front.

The cost basis reporting law applies to both U.S. and foreign stocks. As a result, brokerages and fund companies need detailed corporate actions information to determine the taxability of their holdings and adjust the basis of affected foreign and domestic securities for tax reporting. This can be particularly challenging when dealing with foreign stocks because U.S. tax opinions for foreign corporate actions are rarely available.

Additionally, as part of the law, companies engaging in a corporate action that has a quantitative effect on basis must report the event to the IRS in an “issuer statement.” The information must be filed by issuers within 45 days of an event on the new IRS Form 8937. However, in many cases, brokers still need to allocate resources to track and review supplementary issuer corporate action tax information. And many issuer returns include lengthy tax discussions that need to be deciphered.

To help financial organizations determine taxability of corporate actions, Wolters Kluwer Financial Services has introduced its Foreign Corporate Actions Taxability Service (FCATS™) and Capital Changes Issuer Statement Reporting Service (CISR™ 8937):

  • FCATS – Automates delivery of the essential corporate actions taxability details that brokers need to adjust the basis of covered foreign and domestic securities for cost basis reporting.
  • CISR 8937 - A centralized repository for all publicly available issuer statements that includes expert analysis, as well as fielded corporate action, security and taxability details and links to original IRS Form 8937s.

Both services rely on the corporate actions tax expertise of Wolters Kluwer Financial Services’ Capital Changes team, which has been dedicated to providing in-depth analysis and taxability details for foreign and domestic corporate actions since 1948.

“The securities industry has put a strong focus on cost basis reporting compliance, but the complex facets of the law related to corporate actions can sometimes be overlooked until customer service is affected by missing tax data,” said Stevie Conlon, senior director and tax counsel at Wolters Kluwer Financial Services. “Firms that address corporate actions taxability up front can help minimize operational issues and prevent the potential for millions of dollars in penalties, as well as reputational damage.”

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