Wyden’s proposed changes to the act in May as he believed it’s current form was “hopelessly antiquated, needlessly complex, and riddled with loopholes”.
He added: “As a result, sophisticated taxpayers may manipulate the timing or character of underlying investments or the derivative contracts themselves.”
In his proposed reform, Wyden claimed his changes to the US Securities Markets Coalition’s tax regime would make derivatives contracts simpler if there was just one timing rule, one character rule and, one sourcing rule.
Wyden argued that his amendment would “[Strike] nine code sections and streamline many others in the process. The bill would also introduce a general rule for capital hedging whilst scaling back in the current, complex straddle rules”.
In a statement released this week, the coalition said that the tax treatment of exchange-traded options is “governed by well-established rules that are relatively simple and easy to understand”.
“The fact that the rules are old, is no argument for replacing them. Broad-brush reform of the nature represented by MODA 2017 will create new, untold complexities.”
It added: “While we applaud Senator Wyden’s stated interest in ‘radically simplifying’ the tax code to create ‘a simpler, more straightforward tax regime,’ we respectfully believe that MODA 2017 would not advance this objective, but instead would create results that are neither simple, nor straightforward, nor fair, as applied to exchange-traded options.”