The Senate is in session next week (week of 28 September) rather than beginning their recess in the lead-up to the 3 November midterm elections. With the House planning to be out of session until after the elections and the Senate planning to recess after next week, there is speculation over what Congress will address during the post-election lame-duck session — and that undoubtedly will be influenced by the elections' outcome.

One major question is how the Senate Finance Committee may respond to the cryptocurrency tax bill, the Digital Asset Tax Certainty Act (H.R. 10357), approved by the House Ways & Means Committee on 16 September. Senate Finance Committee Chairman Mike Crapo (R-ID) this week was quoted as saying the committee would "give it a thorough review" but noncommittal on whether it would be revised. The election results will also substantially affect the dynamic for a year-end tax bill.

The IRS released Notice 2026-61 on 21 September, extending through 2028 the phase-in period most recently provided by Notice 2024-44 for complying with the final regulations on dividend equivalents under IRC Sections 871(m), 1441, 1461 and 1473. Notice 2026-61 gives withholding agents two additional years to operate under the existing phase-in framework. The extension is particularly important because implementing new requirements can generally take the industry at least 18 months.

More specifically, the relief postpones applying the regulations to non-delta-one transactions occurring through 2028 and continues transitional treatment for qualified derivatives dealers (QDDs), qualified intermediaries (QIs) acting as qualified securities lenders (QSLs) and withholding agents. The Notice provides similar relief as Notices 2024-44 and 2022-37.

The Notice states that Treasury and the IRS are continuing to evaluate the IRC Section 871(m) regulations and will consider comments already received, as well as additional comments concerning tax policy, legal authority and administrative feasibility. They also intend to give taxpayers and withholding agents sufficient implementation time for any future changes. A Tax Alert provides details.

IRC Section 871(m) establishes US withholding tax requirements for dividend-equivalent payments on certain equity derivatives. The provision was enacted to prevent non-US investors from avoiding taxation that would otherwise apply to direct investments in dividend-paying US securities.