North American Tax Committee of ISDA welcomes efforts to clarify US Regulations

Article summary

The North American Tax Committee (NATC) of the International Swaps and Derivatives Association (ISDA) has provided comments on the treatment of the modification of non-debt derivatives under section 1001 of the Code of Federal Regulations (Regulations) to the Department of the Treasury. The NATC supports the US Government’s effort ‘to provide much-needed guidance’ on the treatment of the modification of non-debt derivatives. According to NATC, clearer rules are needed to both enable taxpayers ‘to execute modifications desirable from a business standpoint without experiencing undue tax risks’ and to discourage taxpayers who would interpret ‘the lack of authority to their benefit’. Several recommendations have been included, notably to define ‘modification’ within the Regulations, to provide clear instructions as to what constitute a modification of a derivative, and to treat specific modifications as ‘significant’.