Sponsor
Ronald Lee Wyden
Senator · D-OR
Senator · D-OR
The bill increases tax code clarity and reporting transparency for derivatives and related rules—giving the IRS clearer administration and many taxpayers greater certainty—while imposing tighter definitions, loss‑recognition limits, and new reporting/transition burdens that may raise taxes and compliance costs for traders, funds, and other affected taxpayers.
Taxpayers who use derivatives (including dealers, traders, and financial institutions) get clearer, reorganized definitions and standardized tax rules for derivatives and straddles, reducing ambiguity about tax treatment and easing long‑term compliance.
REITs, RICs, and other investment funds receive specified rules for hedging and NOL/taxable income computations, improving tax certainty for fund managers and investors.
Taxpayers are required to report positions with year‑end unrecognized gain and are given a clear 90‑day transition window, which improves transparency for the IRS and provides a short, specified period to implement new identification/reporting requirements.
Dealers, traders, and other taxpayers may face higher taxable income and larger tax bills because exclusions are narrowed, loss recognition is limited, carryover rules are imposed, and timing of income may change.
Taxpayers, financial institutions, and payroll/reporting systems will incur increased compliance, reporting, and transition costs (new year‑end disclosures, system updates, recordkeeping) to meet the revised rules and definitions.
Placeholder provisions and required Treasury/IRS rulemaking create short‑term regulatory uncertainty, leaving taxpayers and preparers without full guidance until regulations are finalized.
Based on analysis of 5 sections of legislative text.
Creates a new Subchapter E part to modernize derivatives taxation, revises dealer/trader and straddle rules, and repeals several legacy capital-gains provisions with conforming edits.
Official title: Amend the Internal Revenue Code of 1986 to modernize the tax treatment of derivatives and their underlying investments, and for other purposes.
Introduced April 16, 2026 by Ronald Lee Wyden · Last progress April 16, 2026
Modifies the Internal Revenue Code to create a new, modernized part for taxing certain derivatives, revises mark-to-market and straddle rules for dealers and traders, and repeals multiple outdated capital-gains provisions with many conforming cross-reference edits. Most changes take effect for taxable events and positions after a 90-day window following enactment, with identification and hedging-timing rules for positions held at that deadline. The bill narrows and reorganizes exclusions from the statutory definition of “derivative” for dealers/traders, replaces the existing straddle rules with a reorganized framework that limits recognition of losses relative to unrecognized gains, and removes a group of legacy sections (including several 12xx and 1256 provisions) while adding definitional updates that affect how securities and hedging units are identified and taxed.