As a result of new US reporting rules that came into effect on January 1, 2011, Canadian public and private issuers may be subject to a significant information reporting obligation when undertaking one of a wide range of transactions. The new rules are intended to increase compliance in reporting capital gains and losses for US tax purposes.

The rules require issuers of “specified securities” to complete an information return for any “organizational action” that affects the US tax basis of those securities. Specified securities currently include shares of a corporation or a Regulated Investment Company.

On January 1, 2013, or at a later date if determined by the IRS, specified securities will include notes, bonds, debentures, other debt, and certain commodities, contracts or derivatives with respect to commodities, or financial instruments.

IRS reporting rules

Organizational actions that trigger the reporting requirement may include transactions such as mergers, acquisitions, stock splits, stock redemptions, distributions in excess of US earnings and profits, and similar transactions and events.