Section 1001 of the Internal Revenue Code

U.S. Treasury Issues Guidance on the Transition from Interbank Offered Rates to Other Reference Rates

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The U.S. Department of the Treasury issued proposed regulations that provide guidance on the transition from LIBOR. One set of such regulations provides that substituting a “qualified rate,” such as the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York, for an interbank offered rate in a debt instrument or certain other instruments will not result in a re-issuance under Section 1001 of the U.S. Internal Revenue Code. The proposed regulations can be viewed here. Comments and requests for a public hearing must be received by November 25.

Treasury Issues Regulations with Respect to Assignments of Derivative Contracts

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On July 21, Treasury issued temporary and proposed regulations under Section 1001 of the Internal Revenue Code providing that assignments of derivative contracts by dealers to other dealers or clearinghouses are not taxable events if they meet certain criteria, expanding the circumstances allowing dealers to transfer their derivatives positions to clearinghouses or other dealers without a recognition event. Click here to read more.