Julia Bricker, Chief Commercial and Product Officer at WTax, sat down with Katie Sunderland, Associate General Counsel, Tax Law at ICI, to discuss the key tax and operational developments shaping the regulated funds industry.
The conversation covered IRS modernization, e-delivery, the continued manual challenges around tax residency certification, cross-border tax recovery, AI and automation, and the themes expected to shape ICI’s 2026 Tax and Accounting Conference.
Katie Sunderland, Associate General Counsel, Tax Law at ICI
ICI’s recent commentary on IRS modernization highlighted the significance of allowing regulated funds to file tax returns electronically. For fund complexes that had been preparing, printing, assembling, and shipping hundreds or thousands of pages per return, the change removed a paper-based process that had become increasingly disconnected from how tax data is created, reviewed and retained.
For Sunderland, the next operational priority is clear.
“The No. 1 item is IRS-issued Form 6166 certificates of tax residency,” Sunderland said. “The manual nature of the application and receipt process has been a topic of conversation for many years.” The current process can create challenges when certificates are not received in advance of dividend season, with investors potentially missing out on tax relief.
ICI continues to include this issue in its annual requests for guidance to the IRS as a priority item, including in 2026. This year, ICI also referenced the electronic certificate of residence procurement process expected under the EU’s FASTER1 Directive as an example of a more automated approach to tax residency certification, suggesting the US should follow suit.
Sunderland noted that the IRS has started a pilot program to automate the application process for individual applications, and ICI welcomes the expansion and enhancement of that process.
The SEC’s transition to Tailored Shareholder Reports and the shift toward e-delivery also raises a more specific tax reporting issue for U.S. regulated investment companies (RICs).
“There is some concern around the statutory requirement for written statements regarding tax designations of distributions by U.S. RICs,” Sunderland noted.
RICs historically included the tax character of distributions in annual reports sent to shareholders or in publicly posted materials, or both, but the SEC’s 2022 rule Tailored Shareholder Reports reduced the amount of information that can be included in shareholder reports.
There is some ambiguity in whether a RIC satisfies the written-statement requirements of Subchapter M by electronically furnishing the information or by providing a notice that directs shareholders to a publicly available website containing the required tax designation information.
Given investors’ increasing reliance on electronic communication, as well as recent regulatory developments regarding electronic delivery of required disclosures, ICI’s view is that posting this information on a fund’s website is consistent with modern market practice. Guidance confirming that RICs can satisfy the tax reporting requirement by referencing the fund’s tax center website address in the Tailored Shareholder Report would provide welcomed certainty.
As the regulated funds industry adapts to new products, new technology and changing investor expectations, the role of fund tax teams is also evolving.
Sunderland pointed to a clear shift in how tax functions operate within fund complexes.
“Over the years, we have seen a trend where some of the more routine tax functions have been outsourced to external parties,” Sunderland explained.
That shift has changed the profile of in-house tax teams. Rather than focusing only on routine processing, tax professionals are now often highly sophisticated specialists working more closely with different parts of the business, including product development and portfolio management.
Tax teams are also more closely aligned with monitoring after-tax returns, as investment managers increasingly recognize that tax considerations need to be addressed earlier in the product lifecycle.
“Investment managers realize that they must consider the tax implications of investing,” Sunderland said.
That is now reflected in the range of issues tax teams are expected to support. Sunderland pointed to ETF share class tax considerations and decisions around vehicles used to house taxable versus nontaxable investors as examples of the matters now being addressed more directly by fund tax professionals.
Cross-border investing continues to create tax complexity for funds, particularly where rules, documentation requirements and intermediary processes vary across markets. For ICI members, withholding tax recovery has become a much more prominent operational priority.
“This has certainly risen in priority over the years and is a major focus for all our members,” Sunderland explained.
That increased focus is partly driven by fee pressure and the need for managers to identify ways to enhance returns. As Sunderland put it, “every little bit counts,” and minimizing tax leakage has become essential to helping ensure returns are maximized.
The greatest need for improvement is around automation and standardization. Whether the issue is Form 6166 certificates of tax residency or broader tax relief and recovery processes, the industry needs more streamlined and standardized approaches.
Sunderland added: “As a start, moving toward digital documentation would be a huge plus, as this still isn’t standard in all markets.”
ICI is supportive of the EU FASTER Directive’s overarching goals of standardizing and simplifying withholding tax relief processes. FASTER is intended to modernize EU withholding tax procedures by introducing more harmonized relief-at-source and quick-refund processes, making access to withholding tax relief quicker, more consistent and more transparent across Member States.
However, true harmonization across Member States remains uncertain. As that process unfolds, ICI also hopes the gains made with specific tax authorities on improved processes for US and non-EU funds will remain in place.
Several markets continue to create challenges for U.S. regulated investment companies seeking withholding tax relief or retrospective recovery of withholding taxes, but none have been as persistent a focus for ICI as Switzerland.
“Switzerland is always top of the list and has been at ICI for the last 30 years,” Sunderland said.
ICI continues to work on unlocking tax recoveries in Switzerland for U.S. RICs, where challenges remain around the information required for direct and indirect fund shareholders.
Progress has been made elsewhere. After several years of engagement with Norwegian tax authorities, Sunderland noted that ICI has now unlocked a path to dividend tax relief for U.S. RICs, with historic claims now being assessed.
Dividend tax withholding for shares held in Revenue Ruling 81-100 Collective Investment Trusts has also created complexity, with some tax authorities seeking to look through the fund and require disclosure and documentation of underlying participating retirement plans. ICI has worked closely with members and European tax authorities to reach an acceptable level of filing and disclosure.
“It has been great to see these efforts pay off, with Switzerland now accepting participant disclosure rather than residency certification as initially required and Denmark following suit,” Sunderland stated.
However, progress is not always linear. In Spain in both 2019 and 20232, local courts ruled favorably for U.S. RICs, which could have set precedent for additional withholding tax relief or recovery beyond standard treaty rates. Despite the favorable rulings, claims remain contested on the basis that the tax may be neutralized where a U.S. RIC passes through tax credits to its investors.
In 2025, the Spanish Supreme Court referred the issue to the Court of Justice of the European Union (CJEU), asking whether the theoretical availability of tax neutralization under U.S. law is sufficient for EU law purposes, or whether actual neutralization must be demonstrated. The awaited CJEU ruling will be pivotal, as it should clarify the tax neutralization question and may materially shape the outcome of pending and future Spanish withholding tax reclaims by U.S. RICs.
India also continues to present administrative challenges, particularly given the volume of assessment notices, as well as significant capital gains tax implications in certain reorganizations. At the same time, ICI has seen success with the recent enactment of a complete exemption from Indian income tax for foreign portfolio investors on income from government securities.
More broadly, Sunderland pointed to tax authorities increasing the burden of proof for withholding tax relief, including requirements for detailed transaction reporting, reasoning for stock holdings and disclosure of trading activity around income payment dates.
AI and automation are becoming a greater focus for fund tax, accounting and compliance teams as firms look to manage complexity more efficiently.
Sunderland sees members adopting AI in many of the areas expected, including automated document validation, return preparation and information collection.
“This obviously creates huge opportunity for efficiency,” Sunderland explained.
The opportunity, however, comes with an important governance consideration. For ICI members, the main concern is ensuring there is sufficient human oversight and expertise to maintain strong governance, compliance and practical delivery.
That caution is particularly relevant in tax reclaim processing, where many processes remain heavily paper-based and dependent on market-specific documentation.
“Given the fact that tax reclaim processing is still heavily paper-based, AI adoption is probably slightly slower than it is in some other industries,” Sunderland stated. “But it is becoming a greater focus.”
Looking ahead to ICI’s 2026 Tax and Accounting Conference, Sunderland expects the agenda to remain focused on key market updates and the issues most directly affecting fund tax and accounting professionals.
Withholding tax recovery will remain firmly on the agenda, particularly in relation to Switzerland.
“A key theme will be Switzerland and the challenges U.S. RICs are facing with recovering withholding tax for the portion of the fund held by direct investors,” Sunderland explained.
That focus reflects the wider market-specific complexity still affecting withholding tax relief and recovery for regulated funds, particularly where documentation and investor disclosure requirements remain challenging.
Outside withholding tax, the conference agenda will also reflect areas where fund structures and technology continue to evolve.
“Other key themes will include ETF innovation and related tax matters and tokenization, as both of these are growing in focus for our Tax Committee,” Sunderland noted.
Together, those themes point to the broader direction of travel for fund tax and accounting teams: greater complexity, more technical specialization and a continued need for practical solutions that support efficient fund operations and investor outcomes. For Sunderland, the conference will provide a timely forum for tax and accounting professionals to work through those issues as the regulated funds industry continues to evolve.
1 Council Directive (EU) 2025/50 on faster and safer relief of excess withholding taxes
2 Spanish Supreme Court Judgment of 13 November 2019, STS 1581/2019
Spanish National Court Judgment of 7 March 2023, SAN 773/2023