The US Internal Revenue Service has released a 59-page Proposed Regulation project that, if adopted in substantially the same form as proposed, will require US issuers of convertible financial instruments to report information on taxable conversion rate adjustments (CRAs) made with respect to such securities. In addition, the Proposed Regulations will impose withholding tax obligations on such issuers, financial institutions holding convertible securities and borrowers of such securities, in cross-border transactions. In the market, these developments are known as the “305(c) withholding regulations.” Mark Leeds of Mayer Brown’s New York office describes these developments and their potential market impact in the attached Legal Update.

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