Section 871(m)
of the Code and Treasury regulations promulgated thereunder
(“Section 871(m)”) generally impose a 30% withholding
tax (unless an
income tax treaty applies) on dividend equivalents paid or deemed
paid to Non-U.S. Holders with respect to certain
financial
instruments linked to U.S. equities or indices that include U.S.
equities. Section 871(m) provides certain exceptions to
this
withholding
regime, including for instruments linked to certain broad-based
indices that meet requirements set forth in the
applicable
Treasury
regulations. Additionally, a recent IRS notice excludes from the
scope of Section 871(m) instruments issued prior to January
1,
2025 that do not
have a delta of one with respect to underlying securities that
could pay U.S.-source dividends for U.S. federal
income
tax purposes
(each an “Underlying Security”). Based on certain determinations
made by us, we expect that Section 871(m) will not
apply
to the notes
with regard to Non-U.S. Holders. Our determination is not binding
on the IRS, and the IRS may disagree with this
determination.
Section 871(m) is complex and its application may depend on your
particular circumstances, including whether you enter
into other
transactions with respect to an Underlying Security. If necessary,
further information regarding the potential application
of
Section 871(m)
will be provided in the pricing supplement for the notes. You
should consult your tax adviser regarding the
potential
application of
Section 871(m) to the notes.
The Estimated Value of the Notes
The
estimated value of the notes set forth on the cover of this pricing
supplement is equal to the sum of the values of the
following
hypothetical
components: (1) a fixed-income debt component with the same
maturity as the notes, valued using the internal funding
rate
described below,
and (2) the derivative or derivatives underlying the economic terms
of the notes. The estimated value of the notes does
not represent a
minimum price at which JPMS would be willing to buy your notes in
any secondary market (if any exists) at any time. The
internal funding
rate used in the determination of the estimated value of the notes
may differ from the market-implied funding rate for
vanilla fixed
income instruments of a similar maturity issued by JPMorgan Chase
& Co. or its affiliates. Any difference may be based
on,
among other
things, our and our affiliates’ view of the funding value of the
notes as well as the higher issuance, operational and
ongoing
liability
management costs of the notes in comparison to those costs for the
conventional fixed income instruments of JPMorgan
Chase
& Co. This
internal funding rate is based on certain market inputs and
assumptions, which may prove to be incorrect, and is intended
to
approximate the
prevailing market replacement funding rate for the notes. The use
of an internal funding rate and any potential changes
to that rate may
have an adverse effect on the terms of the notes and any secondary
market prices of the notes. For additional
information, see
“Selected Risk Considerations — The Estimated Value of the Notes Is
Derived by Reference to an Internal Funding
Rate” in this
pricing supplement.
The
value of the derivative or derivatives underlying the economic
terms of the notes is derived from internal pricing models of
our
affiliates.
These models are dependent on inputs such as the traded market
prices of comparable derivative instruments and on
various
other inputs,
some of which are market-observable, and which can include
volatility, dividend rates, interest rates and other factors,
as
well as
assumptions about future market events and/or environments.
Accordingly, the estimated value of the notes is determined
when
the
terms of the notes are set based on market conditions and other
relevant factors and assumptions existing at that
time.
The
estimated value of the notes does not represent future values of
the notes and may differ from others’ estimates. Different
pricing
models and
assumptions could provide valuations for the notes that are greater
than or less than the estimated value of the notes. In
addition, market
conditions and other relevant factors in the future may change, and
any assumptions may prove to be incorrect. On
future dates,
the value of the notes could change significantly based on, among
other things, changes in market conditions, our or
JPMorgan Chase
& Co.’s creditworthiness, interest rate movements and other
relevant factors, which may impact the price, if any,
at
which JPMS would
be willing to buy notes from you in secondary market
transactions.
The
estimated value of the notes will be lower than the original issue
price of the notes because costs associated with selling,
structuring
and hedging the
notes are included in the original issue price of the notes. These
costs include the selling commissions paid to JPMS
and other
affiliated or unaffiliated dealers, the projected profits, if any,
that our affiliates expect to realize for assuming risks inherent
in
hedging our
obligations under the notes and the estimated cost of hedging our
obligations under the notes. Because hedging our
obligations
entails risk and may be influenced by market forces beyond our
control, this hedging may result in a profit that is more or
less
than expected,
or it may result in a loss. A portion of the profits, if any,
realized in hedging our obligations under the notes may
be
allowed to other
affiliated or unaffiliated dealers, and we or one or more of our
affiliates will retain any remaining hedging profits.
See
“Selected Risk
Considerations — The Estimated Value of the Notes Will Be Lower
Than the Original Issue Price (Price to Public) of the
Notes” in this
pricing supplement.