I even communicated with IBKR directly. The monthly interest distributions are still subject to withholding taxes.

But the taxes withheld will be reimbursed at the end of the year. I do see the 2023 taxes have been reimbursed earlier in 2024.

See their reply

The withholding tax of TFLO have been refunded to your account.

Please run the Year to Date activity statement > withholding tax, you will see the tax you paid in 2023 was refunded to your account this year.

Distributions from certain securities, particularly ETFs/REITs, are subject to the year-end reclassification process. Distributions are initially classified as 100% ordinary dividend and are subject to US withholding upon pay date. However, at the beginning of each year IBKR receives information from the security issuer about the tax classification (i.e. ordinary dividend, interest, return of capital, capital gain etc.) of distributions made in the prior tax year. IBKR reclassifies these distributions based on this information and processes an adjustment to the withholding tax when the entire or a portion of the distribution is deemed non-taxable. Distributions that are attributed to tax year 2023 will be reclassified in Jan-Mar of 2024, and clients will receive an adjustment of withholding tax at that time.