Act Quick! Due Date January 17, 2012 for Reporting of Organizational Activities During 2011 Affecting Basis of Securities 

    Published January 06, 2012

    IMPORTANT UPDATE - on Friday, January 13, 2012 the IRS Announced Transition Relief for Filing Form 8937.

    In general, any corporation, whether domestic or foreign and whether public or private, that is owned by U.S. taxpayers, and that undertakes an organizational action that affects the basis of the corporation's securities is now required to report certain information on Form 8937, Report of Organizational Actions Affecting Basis of Securities.  This requirement was added by Section 6045B, and is first applicable to organizational actions occurring after December 31, 2010.

    General Due Date; New Form 8937 Due by January 17, 2012 for 2011 Events

    A Form 8937 must typically be filed with the IRS on or before the 45th day following the organizational action.  However, if earlier, it must be filed by January 15 of the year following the calendar year of the organizational action.  As the final Form 8937 was not released by the IRS until January 2012, Notice 2011-18 provided transitional relief to waive penalties under Section 6721 for corporate actions taken during 2011 if the Form 8937 is filed with the IRS (or posted on the issuer's website as described below) by January 17, 2012.

    The final Form 8937 was released on January 5, 2012, and the related instructions were released on January 6, 2012.  Thus, affected corporations and tax preparers now have little time to comply by the January 17, 2012 due date for organizational actions that occurred during 2011.

    Examples of Common Organizational Actions that Require Reporting

    Some of the common organizational actions that affect a shareholder's basis in a company's shares and may require reporting on Form 8937 include:

       *  stock split;
       *  tax-free acquisition, such as a merger;
       *  payment of a stock dividend to shareholders;
       *  cash distribution treated as a return of capital (distribution exceeds current and accumulated earnings and profits (E&P)); and,
       *  tax-free spin-off.

    How to File

    The Form 8937 typically is filed with the IRS in Ogden, Utah.  Taxpayers that are required to file Form 8937 are also required to provide a copy of the form (or a written statement containing the same information) to each security holder of record as of the date of the organizational action and all subsequent holders of record up to the date that the copy of the Form 8937 is provided.

    Such issuer statements are generally required to be provided on or before January 15 of the year following the calendar year of the organizational action.

    Public Reporting

    Taxpayers are not required to file Form 8937 with the IRS or furnish issuer statements to security holders if, by the due date for filing Form 8937, the company posts a completed Form 8937 in a readily accessible format in an area of its primary public website that is dedicated to this purpose, and the information is made accessible to the public on this website (or the website of any successor organization) for ten years.


    The potential penalties for failing to meet the reporting obligations of section 6045B include:

       *  $100 for each failure to file a return with the IRS, with a maximum of $1.5 million per year; and,
       *  $100 for each failure to furnish a statement to a shareholder, with a maximum of $1.5 million per year.

    Additional (and more substantial) uncapped penalties may apply for intentional disregard of the reporting requirements.

    Some Exceptions and Special Rules to Filing Form 8937

    The form is required only when an organizational action affects the basis of all holders of a security or all holders of a class of the security.

    Further, no reporting is required if the company determines that all of the holders of the security are exempt recipients, including C-corporations, charitable organizations, foreign holders, IRAs, Archer MSAs, health savings accounts (HSAs), the United States, a state, or political subdivisions.

    Special rules exist for S-corporations and for certain regulated investment companies (RICs) and real estate investment trusts (REITs).

    Previous related AICPA coverage:

    Information Reporting Requirements Affect Corporations and Transferors of Securities - September 1, 2011

    Transitional Relief for Some Stock Basis Reporting Requirements, regarding Notice 2011-18 - May 1, 2011

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