Legislative Update: Finance Chairman Wyden’s bill on tax treatment of derivatives

“Modernization of Derivatives Tax Act of 2021” (MODA)

“Modernization of Derivatives Tax Act of 2021" is introduced

U.S. Senate Finance Committee Chairman Ron Wyden (D-OR) today introduced a bill, the “Modernization of Derivatives Tax Act of 2021” (MODA).

The bill would:

  • Unify and simplify the treatment of derivatives by providing one timing rule, one character rule, and one sourcing rule for all derivatives
  • Expand the scope of the mark-to-market timing rule to a broader class of taxpayers and arrangements than has been subject to such a rule in the past
  • Treat gain or loss from derivatives and certain related assets as ordinary income or loss.
  • Source the flows on derivatives generally to the country of residence, incorporation or organization of the taxpayer

The Joint Committee on Taxation (JCT) prepared a report that provides an explanation and description of the bill: JCX-34-21


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