Introduction – What Is Form 8937?

IRS Form 8937, titled Report of Organizational Actions Affecting Basis of Securities, is an informational tax return governed by the Internal Revenue Service (IRS) and the U.S. Department of the Treasury. It is filed by companies and other entities that issue securities, such as common stock, preferred shares, or corporate bonds.

Whenever an issuing company undertakes a structural corporate event—such as a stock split, merger, spinoff, or return of capital—that alters the tax cost basis of its securities in the hands of investors, it must complete Form 8937. This document details the exact nature of the transaction and explains how shareholders should adjust their investment records for federal tax purposes.

Purpose of the Form – Why Does Form 8937 Exist?

Under federal tax law, brokers and custodians are legally required to track and report an investor’s adjusted cost basis on Form 1099-B when securities are sold. However, when a corporation alters its capital structure, brokers cannot accurately calculate that adjusted cost basis without official guidance from the company itself.

Congress introduced Internal Revenue Code (IRC) Section 6045B to resolve this communication breakdown. Form 8937 solves the problem by forcing issuers to publish the exact tax mechanics, allocation percentages, and statutory code sections governing the transaction. This transparency ensures that retail investors, wealth managers, and brokerage clearinghouses report capital gains and losses accurately.

Who Needs to File This Form?

Form 8937 must be prepared by any domestic or foreign issuer of a “specified security” if an organizational action taken by that issuer affects the tax basis of that security for U.S. holders. Common events that trigger Form 8937 include:

Stock Splits and Reverse Splits: Forward splits (e.g., 2-for-1) that decrease per-share basis or reverse splits (e.g., 1-for-10) that increase per-share basis.
Nontaxable Stock Dividends: Distributing additional shares or stock purchase rights to existing shareholders without cash consideration.
Nondividend Distributions (Return of Capital): Cash or property distributions that exceed the company’s current and accumulated earnings and profits (E&P), reducing the shareholder’s underlying stock basis.
Corporate Reorganizations and Mergers: Mergers, recapitalizations, and consolidations where old shares are exchanged for new shares or a mix of cash and equity.
Corporate Spinoffs and Split-Offs: Carving out a subsidiary and distributing its shares to parent company shareholders under IRC Section 355.

Who Is Exempt / Not Required to File?

Not every corporate distribution or restructuring triggers Form 8937. Issuers are exempt or excused from filing under the following circumstances:

Ordinary Taxable Dividends: Distributions that are fully covered by corporate earnings and profits (E&P) are treated as taxable dividend income and do not affect the capital basis of the underlying stock.
Exempt Recipients Only: If the issuer can demonstrate that all holders of the security on the date of the action were exempt recipients (such as C corporations, financial institutions, tax-exempt retirement plans, or non-U.S. investors), no filing is required.
Transactions with No Basis Impact: Corporate name changes, ticker symbol updates, or minor administrative changes that have zero effect on shareholder basis.
The 10-Year Public Website Safe Harbor: Under Treasury Regulation Section 1.6045B-1(a)(3), an issuer is completely exempt from mailing Form 8937 to the IRS or furnishing it individually to shareholders if it posts a completed Form 8937 in an easily accessible public area of its primary website (such as its Investor Relations page) by the due date and keeps it publicly available for 10 years.

When to File Form 8937

Form 8937 is an event-driven compliance form with strict statutory deadlines. An issuer must file Form 8937 or make it available online on or before the earlier of two dates:

The 45-Day Deadline: The 45th day following the date of the organizational action.
The Annual Year-End Deadline: January 15 of the calendar year immediately following the calendar year in which the organizational action occurred.

For example, if a corporation executes a 3-for-1 stock split on May 1, the form must be filed or posted online within 45 days (by mid-June). However, if an action occurs on December 15, the firm cannot take 45 days; it must file or post by January 15 to ensure brokers receive the data before generating annual Form 1099 statements.

Where and How to File

If an issuer chooses not to use the public website posting safe harbor, it must mail a physical copy of Form 8937 to the designated IRS address as per instructions for Form 8937. The issuer must also furnish a copy of the form (or an equivalent statement) to each registered shareholder or nominee holding the security on the action date.

In practice, the vast majority of publicly traded corporations fulfill their legal obligation through the website posting option. Posting a clear, downloadable PDF of Form 8937 on the company’s Investor Relations web page by the statutory deadline satisfies both the IRS filing requirement and the shareholder furnishing requirement simultaneously, provided it remains online for at least 10 years.

Step-by-Step Instructions to Fill Form 8937

Form 8937 is a two-page document divided into two primary parts: issuer contact information and a detailed narrative explaining the tax mechanics of the organizational action.

Part I – Reporting Issuer

Part I collects general corporate identification details. Enter the issuer’s legal business name, Employer Identification Number (EIN), corporate address, and the name, direct telephone number, and email address of a designated tax or investor relations representative. You must also supply the security classification (such as common stock), CUSIP number, and ticker symbol.

Part II – Organizational Action

Line Number	Item Description	Detailed Filing Directions
Line 14	Description and dates of action	Describe the specific transaction (e.g., forward stock split, spin-off, merger) and report the record date, effective date, and distribution date.
Line 15	Quantitative effect on basis	Explain the mathematical impact on a per-share basis or as a percentage of original basis. For instance, in a 2-for-1 split, state that the basis of each post-split share equals 50% of the pre-split share’s basis.
Line 16	Calculation of change in basis	Provide the valuation data, relative fair market values, or allocation formulas supporting the Line 15 numbers (especially critical in corporate spin-offs).
Line 17	Applicable tax code sections	List the specific Internal Revenue Code sections governing the tax treatment (e.g., IRC Section 305(a) for stock splits, Section 301(c)(2) for return of capital, or Section 355 for spin-offs).
Line 18	Loss recognition check	State whether shareholders can recognize a tax loss as a result of the organizational action (e.g., “No loss may be recognized under Section 354”).
Line 19	Other operational information	Provide any additional facts required for brokers to process the change, including the applicable tax year for the adjustment.

Required Documents and Information Needed Before Filling

To accurately prepare Form 8937, compile these corporate, legal, and accounting records:

Board Resolutions and Corporate Minutes: Legal documentation establishing the record date, distribution date, and formal corporate approval of the action.
Transfer Agent Share Registries: Official records showing pre-action and post-action share counts, CUSIP numbers, and ticker symbols.
Earnings and Profits (E&P) Studies: Current and accumulated E&P calculations (mandatory when certifying that cash payouts are nondividend returns of capital).
Independent Valuation Appraisals: Fair market value appraisals or closing price records used to allocate basis between parent and spinoff shares.
Formal Legal Tax Opinions: Memoranda from legal counsel or tax advisors confirming the governing Internal Revenue Code sections and nonrecognition provisions.

Common Mistakes to Avoid

Failing to follow strict Treasury guidelines can result in penalties or broker rejections. Watch out for these frequent mistakes:

Missing the January 15 Compression Deadline: Assuming you always have 45 days. Actions occurring late in the calendar year are subject to the hard January 15 deadline, which overrides the normal 45-day window.
Failing to Maintain 10-Year Web Accessibility: If you use the website safe harbor, redesigning your website and removing past Form 8937 PDFs invalidates your exemption retroactively.
Vague Narrative Explanations: Providing incomplete formulas on Line 15 and Line 16. The IRS expects exact mathematical ratios or per-share dollar amounts so brokers can automate system updates.
Confusing Return of Capital with Ordinary Dividends: Labeling a distribution as a return of capital on Form 8937 without completed E&P accounting to prove distributions exceeded earnings.
Omitting Valid Contact Information: Failing to provide a direct phone number and monitored email address for investor questions in Part I.

Penalties for Non-Filing or Errors

Failure to timely file Form 8937 or furnish required statements carries statutory penalties under the Internal Revenue Code:

Information Return Penalties (IRC Section 6721): Imposed for failing to file correct information returns with the IRS by the due date. Penalties range from minor per-return fines to significant annual statutory maximums depending on how late the return is submitted.
Payee Statement Penalties (IRC Section 6722): Imposed for failing to furnish correct statements to shareholders or nominees (or failing to post properly online).
Intentional Disregard Penalties: If the IRS determines that an issuer intentionally ignored basis reporting requirements, the penalty jumps to at least $500 per failure, or 10 percent of the aggregate dollar amount of items required to be reported, with no annual statutory cap.

Related Forms and Schedules

Form 8937 coordinates with several other corporate and investor reporting documents:

Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (where brokers report the adjusted basis established by Form 8937).
Form 8949: Sales and Other Dispositions of Capital Assets (used by individual shareholders to report sales based on updated basis).
Form 1099-DIV: Dividends and Distributions (specifically Box 3 for nondividend return of capital distributions).
Form 5452: Corporate Report of Nondividend Distributions (filed by corporations with their tax returns to report return of capital payouts).
Form 1120: U.S. Corporation Income Tax Return.

Frequently Asked Questions

Why do most public companies post Form 8937 on their website rather than mailing it?

Under Treasury regulations, posting Form 8937 publicly on the company’s website for 10 years satisfies both the requirement to file with the IRS and the requirement to mail statements to thousands of individual shareholders, saving substantial administrative and mailing costs.

Does a routine 2-for-1 stock split require Form 8937?

Yes. A stock split directly alters the per-share tax basis of the security (cutting it in half while doubling share count), making Form 8937 mandatory under IRC Section 6045B.

Is Form 8937 required for standard cash dividends?

No. If a cash distribution is fully covered by corporate earnings and profits, it is treated as ordinary dividend income and does not adjust the underlying basis of the stock.

What is the difference between Form 8937 and Form 5452?

Form 5452 is an attachment to a corporation’s annual tax return (Form 1120) supporting nondividend distributions. Form 8937 is an event-driven public report filed within 45 days of the action to inform brokers and shareholders how to adjust their records.

How does a retail investor use Form 8937?

Retail investors do not file Form 8937. Instead, they look at the form published by the company to understand how a recent spinoff, split, or merger changed their cost per share, helping them verify that their brokerage Form 1099-B is correct.

Can an issuer update or amend Form 8937?

Yes. If initial return of capital calculations were based on reasonable E&P estimates and the final year-end audit alters the figures, the issuer must file or post an amended Form 8937 within 45 days of determining the correct figures.

Conclusion – Key Takeaways Summarized

IRS Form 8937 is an essential disclosure document that bridges the gap between corporate actions and everyday investor tax reporting. By documenting how stock splits, mergers, and return-of-capital distributions alter security basis, it ensures transparency across brokerage firms and financial markets.

To remain compliant, corporate issuers must track the earlier of the 45-day or January 15 deadline, provide precise mathematical formulas in Part II, and either mail notices to holders or take advantage of the 10-year public website posting safe harbor.

IRS Form 8937 Guide: Organizational Actions Affecting Basis