RAL

Are there any tax implications or withholding considerations for foreign versus domestic shareholders receiving this dividend?

Created August 06, 2025 at 10:12 PM

Short answer:

- U.S.‑based (domestic) shareholders treat the $0.05‑per‑share cash dividend as ordinary dividend income on their U.S. tax return. Depending on the shareholder’s overall taxable income, the dividend may be taxed at the “qualified‑dividend” rates (0 %, 15 % or 20 %) or, if the shareholder does not meet the qualified‑dividend requirements, at the ordinary income tax rate. State income‑tax obligations may also apply.

- Foreign (non‑U.S.) shareholders are subject to a mandatory 30 % withholding tax on the dividend unless a tax treaty between the shareholder’s residence country and the United States provides a lower treaty rate (or an exemption). The withholding is reported on Form 1042‑S and the shareholder can claim a credit on the home‑country return for any U.S. tax paid. To obtain a reduced treaty rate, the foreign shareholder must provide a properly completed Form W‑8BEN (or the newer Form W‑8BEN‑E for entities) to Ralliant’s transfer agent before the record date.

Below is a comprehensive overview of the key tax and withholding considerations for both groups, based on the dividend announcement (quarterly cash dividend of $0.05 per share, payable 23 Sep 2025 to shareholders of record 8 Sep 2025).

1. Domestic (U.S.) Shareholders

Issue	Details
Tax treatment	The $0.05 cash dividend is dividend income. If the shareholder holds the shares for the required holding period (generally > 60 days for common stock) and the corporation meets the “qualified‑dividend” criteria, the dividend is a qualified dividend and is taxed at the preferential rates of 0 %, 15 % or 20 % (depending on the shareholder’s taxable income). If the qualified‑dividend rules are not met, the dividend is taxed at the shareholder’s ordinary marginal income‑tax rate.
Reporting	– Form 1040 (U.S. individual income tax return). – Schedule B (Interest and Ordinary Dividends) if total ordinary dividends exceed $1,500 or if the shareholder has other dividend‑related items. – The brokerage or Ralliant’s transfer agent will issue a Form 1099‑DIV (usually by late February 2026) showing the gross amount paid and any backup withholding (if any).
State tax	Most states that levy income tax treat dividend income the same way as the federal return, so the shareholder must also include the dividend on the state return. Some states (e.g., New Hampshire, Tennessee) tax only interest and dividends above a threshold.
Backup withholding	If the shareholder fails to provide a correct Form W‑9 (or the brokerage does not have a valid TIN on file), the payer may be required to withhold 24 % for backup withholding. This is separate from the regular dividend tax.
Capital‑allocation context	The dividend is part of Ralliant’s “organic reinvestment” plan, but the tax consequences are the same as any cash dividend—no special treatment because of the company’s capital‑allocation priorities.

Practical steps for a U.S. investor

Confirm the dividend amount on the brokerage statement (e.g., 1,000 shares × $0.05 = $50).
Check the qualified‑dividend status (most U.S. corporations’ cash dividends qualify).
Report on Form 1040 (qualified dividend on line 3b, ordinary dividend on line 3a).
Keep the Form 1099‑DIV for the tax‑return filing.
If backup withholding was applied, claim the withheld amount as a credit on the return.

2. Foreign (Non‑U.S.) Shareholders

2.1 Mandatory U.S. Withholding

Issue	Details
Default statutory withholding	30 % of the gross dividend is withheld at source for most foreign persons (individuals or entities) who do not claim a reduced treaty rate. The 30 % is a final tax; the foreign shareholder may later claim a credit on the home‑country return for the U.S. tax paid.
Form 1042‑S	The payer (Ralliant’s transfer agent) issues a Form 1042‑S, “Foreign Person’s U.S. Income Tax Return” to the foreign shareholder, summarizing the gross dividend, the amount withheld, and the treaty rate (if any). This is typically provided by early March 2026.
Tax‑treaty reduction	If the shareholder’s residence country has an income‑tax treaty with the United States, the withholding rate may be reduced (often to 15 % or 0 %). The exact rate depends on the treaty article on “Dividends.”
Documentation to claim treaty rate	The foreign shareholder must submit a Form W‑8BEN (or W‑8BEN‑E for foreign entities) to the payer before the record date (8 Sep 2025). The form must: • Include the shareholder’s foreign tax‑identification number (FTIN). • Identify the treaty country and the specific treaty article. • Certify that the beneficial owner is the foreign person and is not a U.S. person.
Potential exemption	Some treaties completely exempt dividends from U.S. tax (e.g., certain EU or Commonwealth countries). In those cases, the foreign shareholder can claim a 0 % rate on the W‑8BEN, resulting in no U.S. withholding.
State‑level withholding	Generally, U.S. states do not impose withholding on foreign dividends; the tax is purely federal.

2.2 Post‑withholding tax credit & reporting

Issue	Details
Home‑country credit	The foreign shareholder can usually claim a foreign‑tax credit (or a deduction) on the resident‑country tax return for the U.S. tax withheld, preventing double taxation. The exact mechanics vary by jurisdiction.
Reporting requirement	The shareholder must keep the Form 1042‑S and any related statements (e.g., brokerage statements) to substantiate the U.S. tax paid. Some countries require a copy of the 1042‑S for the foreign‑tax‑credit claim.
Potential refund	If the treaty rate applied was higher than the statutory 30 % (e.g., a 15 % treaty rate) and the payer mistakenly withheld 30 %, the shareholder can file Form 1040NR (U.S. Non‑Resident Alien Income Tax Return) to request a refund of the excess withholding. This is uncommon; most payers apply the treaty rate correctly once the W‑8BEN is on file.

2.3 Practical steps for a foreign investor

Determine residency and whether a U.S. tax treaty exists. Look up the “U.S.–[Country] Income Tax Treaty” (most are available on the IRS website).
Complete Form W‑8BEN (or W‑8BEN‑E) with:
• Name, address, and foreign tax‑identification number.
• Claim of treaty article and reduced rate (e.g., 15 %).
• Signature and date.
Submit the W‑8BEN to Ralliant’s transfer agent before the record‑date (8 Sep 2025). Failure to do so results in the default 30 % withholding.
Receive Form 1042‑S after the dividend is paid (by early 2026). Verify that the withheld amount matches the treaty rate claimed.
Report the dividend on the home‑country tax return and claim a credit for the U.S. tax paid (or a deduction, depending on local law).
If the treaty provides a 0 % rate and the payer still withheld 30 %, file Form 1040NR to request a refund.

3. Summary of Key Differences

Feature	Domestic (U.S.) Shareholder	Foreign (Non‑U.S.) Shareholder
Taxable in the U.S.?	Yes – on personal return (qualified vs. ordinary).	Yes – but tax is collected via withholding at source.
Withholding	No mandatory withholding (unless backup).	30 % default; reduced by treaty if Form W‑8BEN is provided.
Reporting Form	Form 1040 (Schedule B), Form 1099‑DIV.	Form 1042‑S (provided by payer); may file Form 1040NR for refund.
Potential treaty benefit	Not applicable.	Treaty may lower or eliminate withholding (e.g., 0 % or 15 %).
Credit for U.S. tax	Not needed (tax paid via regular filing).	Home‑country foreign‑tax‑credit for the amount withheld.
Deadline to act	Record date 8 Sep 2025 → dividend 23 Sep 2025.	Must submit W‑8BEN before record date to avoid 30 % withholding.

4. Recommendations & Caveats

Consult a tax professional – The above rules are the general framework, but individual circumstances (e.g., high‑frequency trading, use of a broker‑dealer, dual‑resident status, or specific treaty nuances) can change the outcome.
Verify the treaty article – Some treaties specify a “30 %” rate for dividends unless the shareholder holds a minimum percentage of the paying company (e.g., ≥ 10 %); otherwise the rate may be 0 %. The W‑8BEN must reflect the correct article.
State‑tax considerations for U.S. shareholders – Even though the dividend is modest, high‑income states (e.g., California, New York) still tax dividend income at the individual marginal rate.
Backup withholding – If a U.S. shareholder’s brokerage does not have a valid Form W‑9, the payer may be required to withhold 24 %. Ensure the TIN is up‑to‑date to avoid this.
Dividend reinvestment plans (DRIPs) – If a shareholder participates in a DRIP, the cash dividend is still taxable in the same way; the reinvested shares do not change the tax treatment.
Future dividend size – The $0.05 per share is a quarterly amount; the same tax rules apply each quarter, so the timing of the record date and payment date repeats every three months.

Bottom line

U.S. shareholders: Report the $0.05‑per‑share cash dividend on their individual tax return; it is taxed at the qualified‑dividend rates (0 %, 15 %, 20 %) if eligible, otherwise at ordinary income rates, plus any applicable state tax. No automatic withholding (unless backup withholding applies).
Foreign shareholders: Expect a 30 % U.S. withholding unless a tax treaty reduces the rate. To secure a reduced treaty rate, submit a Form W‑8BEN before the record date (8 Sep 2025). The dividend will be reported on Form 1042‑S, and the shareholder can claim a credit for the U.S. tax on their home‑country return.

Action items:

- Domestic investors – Ensure your brokerage has a current Form W‑9; keep the 1099‑DIV for the next tax filing.

- Foreign investors – Identify any U.S. tax treaty for your country, complete and deliver Form W‑8BEN before 8 Sep 2025, and retain the Form 1042‑S for your home‑country tax reporting.

All of the above is based on the dividend announcement (quarterly cash dividend of $0.05 per share, payable 23 Sep 2025, record date 8 Sep 2025) and the standard U.S. tax rules governing dividend income for domestic and foreign shareholders.