On 10 December 2025, the IRS and Treasury announced forthcoming proposed regulations to address the sourcing of borrow fees in securities lending and sale-repurchase transactions. The proposed rules will source borrow fees to the residence of the recipient, generally exempting non-US securities lenders from US withholding tax.
The guidance applies to transactions documented under standard industry agreements and defines borrow fees broadly, including negative rebates, while excluding bespoke arrangements.
Taxpayers may rely on the Notice immediately, with the regulations applying prospectively to taxable years ending after publication in the Federal Register