The Investment Industry Association of Canada (IIAC) is lauding a decision by the U.S. Internal Revenue Service (IRS) and the Treasury Department that it says will provide relief to IIAC member firms that operate as U.S. qualified intermediaries.

A qualified intermediary is a non-U.S. financial firm that has an agreement with the IRS to track the U.S. or foreign status of beneficial client-owners, report U.S.- source income, and to withhold U.S. tax.

On Aug. 4, the IRS issued a notice indicating that it and Treasury intended to delay the effective date of certain revised requirements related to Section 871(m) of the Internal Revenue Code. The regulations associated with Section 871(m) are aimed at preventing non-U.S. persons from using derivative instruments to avoid U.S. withholding tax on U.S. equities. The IRS also intends to delay the phase-in period for certain other provisions related to 871(m).

“The [revised] changes expanded [the scope] of what firms have to report, and some of that expanded reporting has been delayed an extra year [to January 2019], which our firms wanted, because they have to change quite a bit of what they’re tracking,” says Adrian Walrath, assistant director of policy with the IIAC.

The delay in implementation will also give the IIAC more time to communicate with the IRS its members’ reservations regarding some of the implications of the new regulations. In May, the IIAC wrote to the IRS outlining its concerns, one of which would be the possible effective double taxation of certain payments under the revised regulations.

“This [delay] is a good step to give us more time to either figure out how to avoid the double-taxation,” Walrath says, “or to lobby the IRS to keep what they would call the temporary rules that are in place right now that don’t have the expanded scope in place.”