Sponsors
Introduced April 16, 2026 by Ronald Lee Wyden · Last progress April 16, 2026
This bill trades clearer, more standardized tax rules and stronger reporting for derivatives and hedging (improving administration and reducing ambiguity) against higher compliance costs, shorter transition timing, regulatory uncertainty during implementation, and the risk that many taxpayers — especially traders and financial firms — will face higher or unexpected tax liabilities.
Traders, dealers, investment funds (REITs/RICs), financial institutions, and other taxpayers will get clearer, more standardized tax rules for derivatives, straddles, hedging units, and related definitions, reducing ambiguity about how complex instruments are taxed.
The IRS, Treasury, and taxpayers will benefit from required year‑end reporting of positions with unrecognized gain and a reorganized statutory structure, which should improve tax administration, detection of underreporting, and consistency in enforcement.
Taxpayers and payors (including businesses and plans) will see clearer capital gains/loss rules, tightened cross-references, and clarified "security" definitions, reducing longstanding legal uncertainty about how certain transactions are treated.
Traders, dealers, investment funds, and other taxpayers may face higher tax bills because the bill narrows exclusions, limits loss recognition (with carryover rules), and can change timing of income, increasing taxable income or accelerating tax liability.
Taxpayers and financial institutions that previously relied on broader interpretations could be unexpectedly captured by narrower straddle definitions and new delta‑based offsets, triggering unforeseen tax treatment and disputes over past positions.
Taxpayers (especially those with straddles or hedging relationships) will face increased reporting and recordkeeping burdens — including year‑end disclosures of unrecognized gain and identifying hedging units — raising compliance costs for individuals, businesses, and preparers.
Based on analysis of 5 sections of legislative text.
Modernizes federal tax treatment of derivatives by adding a new part to the Internal Revenue Code, rewriting key dealer/trader mark‑to‑market and straddle rules, and repealing several outdated capital gains and derivatives provisions. It sets new definitions, narrows certain exclusions, replaces the existing straddle loss recognition regime, and requires taxpayers holding related derivatives and underlying investments to make new identifications within a 90‑day transition window. The bill takes effect mostly for taxable events and taxable years ending after a 90‑day period following enactment. The changes will directly affect dealers and traders (section 475 taxpayers), holders of straddles, investors and financial firms that use derivatives, tax administrators, and tax advisers; the Treasury will need to issue implementing guidance and taxpayers will face new reporting and compliance steps.
Rewrites and modernizes tax rules for derivatives, revises dealer/trader mark‑to‑market and straddle rules, repeals several older provisions, and sets a 90‑day transition period.