Modernization of Derivatives Tax Act: Proposals Affecting Derivatives, Hedging and Risk Management Transactions
About The Modernization of Derivatives Tax Act (MODA):
On May 18, 2016, Senator Ron Wyden, Senate Finance Committee Ranking Member, released a discussion draft of The Modernization of Derivatives Tax Act (MODA). MODA includes many of the items affecting the taxation of derivatives that were contained in Chairman Camp’s stand-alone 2013 discussion draft, with some noteworthy additions and revisions.
Similar to Chairman Camp’s 2013 proposal, MODA would attempt to provide uniformity in the tax treatment of derivative transactions by requiring all non-exempt derivative positions to be accounted for on a mark-to-market basis, with resulting gains or losses uniformly treated as ordinary. These derivative reform proposals would, if enacted, dramatically alter the tax character and/or timing of income for derivative products entered into by many taxpayers, including individuals, trading firms and businesses.