Basis Reporting comment letter FINAL
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BOARD OF DIRECTORS September 19, 2007 CHARLES V. ROSSI, President Executive Vice President, US Client Services Computershare Canton, Massachusetts THOMAS L. MONTRONE, Vice President & Assistant Secretary President & Chief Executive Officer Russ Sullivan Registrar and Transfer Company Cranford, New Jersey Staff Director DEBRA H. HACKA, Treasurer Senate Finance Committee Senior Vice President & Department Manager National City Bank 219 Dirksen Senate Office Building Cleveland, Ohio Washington, DC 20510 STEVEN NELSON, Secretary Chairman and President Continental Stock Transfer & Trust Co. New York, New York Kolan L. Davis _________________________ Republican Staff Director ROBERT M. CARNEY, SR. Senior Vice President Senate Finance Committee Bank of New York Mellon Shareowner Services Jersey City, New Jersey 219 Dirksen Senate Office Building MARY CORCORAN Washington, DC 20510 Senior Vice President AIM Investment Services, Inc. Houston, Texas SALLI A. MARINOV President & Chief Executive Officer Re: Proposed Revisions to 26 U.S. Code § 6045 and Related First American Stock Transfer, Inc. Phoenix, Arizona Sections Relating to Broker Reporting of Customer’s JONATHAN E. MILLER Adjusted Basis and Holding Period Information- Senate President StockTrans, Inc. Finance Committee’s Bipartisan Staff Discussion Draft on Ardmore, Pennsylvania Basis/Holding PeriodReportingYEHUDA L. ...
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BOARD OF DIRECTORS CHARLES V. ROSSI, President ExecutiveVice President, US Client Services Computershare Canton,MassachusettsTHOMAS L. MONTRONE, Vice President & Assistant Secretary President& Chief Executive Officer Registrarand Transfer Company Cranford,New Jersey DEBRA H. HACKA, Treasurer SeniorVice President & Department Manager NationalCity Bank Cleveland,OhioSTEVEN NELSON, Secretary Chairmanand President ContinentalStock Transfer & Trust Co. NewYork, New York _________________________ ROBERT M. CARNEY, SR. SeniorVice President Bankof New York Mellon ShareownerServices JerseyCity, New Jersey MARY CORCORAN SeniorVice President AIMInvestment Services, Inc. Houston,TexasSALLI A. MARINOV President & Chief Executive Officer FirstAmerican Stock Transfer, Inc. Phoenix,Arizona JONATHAN E. MILLER President StockTrans,Inc. Ardmore,Pennsylvania YEHUDA L. NEUBERGER SeniorVice President AmericanStock Transfer & Trust Company NewYork, New York WILLIAM J. SPEIRS AssistantVice President, CIBCMellon Trust Company Toronto,Ontario, Canada EXECUTIVE DIRECTOR CYNTHIAJONESADMINISTRATOR CAROLA. GAFFNEY
SPECIAL ADVISORY GROUP
LEGAL COMMITTEE STEVENDOLMATCH STEVENNELSON
PROCESSING COMMITTEE ANNENEUBERGER JOHNULLA
STAMP ANDREWM. MASSA
TRAINING COORDINATOR KEVINP. IRWIN
September 19, 2007 Russ Sullivan Staff Director Senate Finance Committee 219 Dirksen Senate Office Building Washington, DC 20510 Kolan L. Davis Republican Staff Director Senate Finance Committee 219 Dirksen Senate Office Building Washington, DC 20510 Re:Proposed Revisions to 26 U.S. Code § 6045 and Related SectionsRelating to Broker Reporting of Customer’s AdjustedBasis and Holding Period Information- Senate FinanceCommittee’s Bipartisan Staff Discussion Draft on Basis/HoldingPeriod Reporting Dear Messrs. Sullivan and Davis: The Securities Transfer Association (“STA”) appreciates the opportunity to submit comments upon the proposed tax reporting revisions referenced above. The STA is a professional association of transfer agents. Founded in 1911, the STA is an association representing more than 150 commercial stock transfer agents around the United States, including commercial transfer agents and mutual fund agents. Collectively, the STA members serve as transfer agent for more than 15,000 publicly traded corporations, aggregating more than 100,000,000 shareholders. The STA agrees with the areas of concern articulated in prior submissions by the American Bankers Association, SIFMA and The Clearing House, among others, regarding the proposed legislative revisions.
P.O. BOX 5220NEW JERSEY 07730-5220 HAZLET, (732)888-6040(732) 888-2121 FAXcgaffney@stai.org EMAIL:http:\\www.stai.org WEB:
In addition, the STA wishes to highlight the effects of the proposal on its membership. Initially, the STA notes that IRC § 6045, entitled “Returns of Brokers”, does not specifically reference "transfer agents".Instead, the application of the provision to transfer agents is based on the premise that, for purposes of § 6045, a stock transfer agent will be deemed a § 6045 “broker” in instances in which, by the nature of its customary processing services, the transfer agent will come to know the gross proceeds information of a particular transaction.The Internal Revenue Service’s accompanying regulation, 26 CFR 1.6045, makes clear through the following examples included in the regulation that transfer agents are intended to be included in the proposal’s requirements under these circumstances: Example 1. The following persons generally are brokers within the meaning of paragraph (a) (1): (iv) Astock transfer agent for a corporation, which agent records transfers of stock in such corporation,if the natureof the activities of the agent is such that the agent ordinarily would know the gross proceeds from sales.(italics supplied). Example 2. The following persons are not brokers within the meaning of paragraph (a) (1): (i) Astock transfer agent for a corporation, which agent daily records transfers of stock in such corporation,if the nature of the activities of the agent is such that the agent ordinarily would not know the gross proceeds from sales.(italics supplied). Under these provisions, transfer agents that become aware, even indirectly, of gross proceeds information while performing their customary transfer agent duties and responsibilities run the risk of being deemed “brokers” for basis reporting purposes under certain circumstances.Those transfer agents consequently would be required to gather and report information that is not necessary to the performance of those functions and which is not currently maintained by them as part of their required books and records. Also,the relationships between transfer agents and their customers, on one hand, and between broker-dealers and their customers, on the other, are quite different. A transfer agent is the agent of its customer and principal, the issuer, while a broker-dealer is the agent of its customer, the taxpayer/payee.As part of that customer relationship, a broker-dealer is required, both contractually and through SRO rules and other regulations, to “know its customer,” including the tax attributes of the customer.A transfer agent does not have a similar relationship with the taxpayer/payee, and therefore would have only limited access, if any, to accurate basis information. As reflected in other submissions, the gathering of adjusted basis data entails more than asking the taxpayer to submit a statement of what he or she paid for an asset, since factors such as corporate actions, carry-over basis via gifting, stepped-us basis in estate asset situations and increase of basis in dividend reinvestment plans administered by transfer agents can serve to complicate if not render impossible the proposed information-gathering exercise.Similar complexities and difficulties would be applicable to the determination of the applicable asset holding period.If transfer agents become subject to the proposal’s requirements, matters such as tacking of a donor’s holding period and allocating dividend reinvestment purchases into long and short term
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categories would have to be accomplished by parties (i.e., transfer agents) who lack first-hand knowledge of the core tax information and who conceivably would be utilizing information supplied by other parties (i.e., taxpayer/payees) who have a limited knowledge of the tax reporting complexities involved.This result may not accomplish the intended goals of the proposal. We would like to thank you both and the Senate Finance Committee for the opportunity to present the concerns of our membership.We would welcome the opportunity to discuss our views with committee staff and with other relevant parties. Respectfully submitted,
Charles V. Rossi President cc: ThomasA. Barthold, Acting Chief of Staff, Joint Committee on Taxation John L. Buckley, Majority Chief Tax Counsel, House Committee on Ways and Means Jon Traub, Minority Chief Tax Counsel, House Committee on Ways and Means
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