Senate Finance Committee ranking member Ron Wyden (D-OR) yesterday released proposed legislation to modify the taxation of financial derivatives.
According to a section-by-section discussion [PDF 125 KB] on the Finance Committee’s website, the “Modernization of Derivatives Tax Act” (MODA):
“…would require mark to market and ordinary income tax treatment for all derivative contracts, sourcing gains and losses to the taxpayer’s country of residence. In this way, the bill would apply a simpler, more straightforward tax regime to all derivative contracts with one timing rule, one character rule, and one sourcing rule – striking nine code sections and streamlining many others in the process. The bill would also introduce a general rule for capital hedging while scaling back the current, complex straddle rules.”
The website links to an estimate prepared in April 2016 by the Joint Committee on Taxation indicating that the proposal would increase tax revenues by $16.5 billion over 10 years.
Documents relating to the discussion draft—including legislative text, summaries of the bill, and a technical explanation prepared by the staff of the Joint Committee on Taxation—are available on the Finance Committee’s website.
Senator Wyden introduced a discussion draft of MODA in May of 2016. Yesterday’s bill is substantially similar to last year’s discussion draft. Read a discussion of last year’s discussion draft in TaxNewsFlash-Legislative Updates
© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.