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Insights & Alerts
January 13, 2012

Additional Reporting Requirements Relating to Organizational Actions
A special thanks to article contributor Ali Hirji

Additional Reporting Requirements Relating to Organizational Actions Last week, the IRS released Form 8937, “Report of Organizational Actions Affecting Basis of Securities”, which is a filing required for corporations to report 2011 ”organizational actions” affecting basis of stock. All domestic and foreign issuers of securities owned by U.S. taxpayers are required to comply with this reporting requirement for 2011 by filing Form 8937 (or posting it on the public company website) by January 17, 2012. Certain organizations may be exempt from filing, as described below.

An “organizational action” may include, but is not limited to:

  • Stock Splits,
  • Mergers & Acquisitions,
  • Spinoffs,
  • Non-taxable stock dividends,
  • Non-taxable cash or stock distribution.

The IRS is aware of the tight deadline. Marcum LLP suggests that taxpayers comply with the deadline as there is currently no administrative relief. Further, a copy of Form 8937 must be provided to each security holder and nominee of record by January 17, 2012.

For 2011, these rules apply only to corporate stock transactions with an exception for RICs, REITs and S Corporations. (RICs will be subject to these rules in 2012, and beginning in 2013, the reporting rules will be expanded and impose a filing deadline of 45 days after the organizational action.)

As noted above, a reporting organization may post Form 8937 in an accessible format on its website and allow access to it for a period of 10 years. This alternative meets both the filing requirement of the IRS and the information provision requirement to security holders. We expect most filers to follow this alternative as it eliminates the more onerous notification to each security holder. (If a distribution made to shareholders is taxable as a dividend, it is not to be reported on Form 8937, but instead reported on Form 1099-DIV.)

Taxpayers with organizational actions do not need to furnish statements to security holders deemed exempt, such as:

  • Corporations and REITS
  • Tax exempt organizations
  • Governments
  • Security dealers
  • Banks

If all interest holders of an entity with an organizational action are exempt, no filing is required.

The information provided by Form 8937 should enable each security holder to determine their basis, as affected, by the organizational action.

Those taxpayers unsure if they have an organizational action to report should contact their Marcum LLP Tax Advisor.

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