MFA submitted a letter to the Department of the Treasury and the Internal Revenue Service providing feedback on Notice 2025‑63 regarding the sourcing of borrow fees and negative rebate in securities lending and repo transactions. The letter specifically recommends that Treasury and the IRS:
- Explicitly incorporate the Treasury Regulations under Section 988(a)(3)(B) in the rule determining that the residence of the recipient governs the source of borrow fees and negative rebate.
- Clarify that the determination of residence should be made at the partner level for partners in a partnership not engaged in a U.S. trade or business but that do not rely on the Section 864(b)(2) trading safe harbors.
- Clarify the type of documentation needed to support refunds of prior years’ withholding tax.
