PRIA Logo™
119-s-4331119th CongressWALLET

Modernization of Derivatives Tax Act of 2026

Sponsored By: Senator Wyden, Ron [D-OR]

Introduced

Summary

delta-based hedging-unit tax framework would create a unified tax system for derivatives, derivative-like contracts, embedded derivatives, and related corporate and investment-entity rules, changing when gains and losses are recognized and how positions are valued.

Show full summary
  • Investors and investment funds would face new timing and valuation rules. Gains and losses generally must be recognized when specific events occur or at fair market value for certain year-end or hedge-close events. The bill uses a delta-based test that generally counts hedge coverage in the range -0.7 to -1.0.
  • Corporations and REITs would get new, special rules for stock-related and interest-rate derivatives. A reworked Section 1032 would change how corporations treat derivatives tied to their stock and REITs may elect to include fixed-rate debt and interest-rate derivatives in hedging units with transition rules for existing designations.
  • Traders, dealers, and tax administrators would see coordinated changes to straddle, dealer/trader, and commodities rules plus expanded reporting, documentation, and anti-avoidance measures. The Secretary would get broad authority to write implementing regulations and adjust delta or valuation details.

Personalized for You

How does this bill affect your finances?

Personalize government policy and PRIA will tell you what this bill means for your household, plus every other piece of legislation we track. PRIA reads each provision against your financial profile to show you exactly what matters to your wallet.

Free to download

Bill Overview

Analyzed Economic Effects

4 provisions identified: 0 benefits, 1 costs, 3 mixed.

New rules for corporate stock forwards

If enacted, the bill would change how corporations and forwards on their own stock are taxed. When a corporation acquires its stock and enters a forward on that stock, the corporation would include in income the excess of the forward consideration over the stock's fair market value on the forward date. That excess would be treated like original issue discount. Forwards entered within the 60-day window around the acquisition are presumed to be part of a plan unless shown otherwise. This rule would apply to transactions after enactment.

Hedging units and 90-day cutoff

If enacted, the bill would delay most new derivative rules until after a 90-day window and make that date the cutoff for which positions follow the new regime. Taxpayers holding a derivative and its underlying at the end of the 90-day period would have to identify those items before the window closes. Identified positions could form an investment hedging unit that starts the next day. Built-in losses inside a hedging unit would generally not be recognized on certain events, and built-in gains would be treated as capital gain based on a hypothetical sale. REITs could make a special election and get specific transition rules.

New federal rules for derivatives

If enacted, the bill would create a new federal tax part for derivatives and similar contracts. It would define what counts as a derivative and treat embedded parts as derivatives. Gains or losses would generally be measured at fair market value before many taxable events. Many derivative items would be treated as ordinary income and recognized in the year the event occurs. Taxpayers could rely on broker 6045(b) statements or financial statements for valuation.

Offsetting positions, reporting, and dealers

If enacted, the bill would tighten straddle rules so losses are allowed only to the extent they exceed 'unrecognized gain', with any denied loss carried forward. It would define offsetting positions using a delta test from -0.7 to -1.0. Taxpayers would have to report year-end positions that have unrecognized gain, unless the IRS waives that reporting. Dealers and traders would see some derivatives excluded from mark-to-market treatment to align with the new regime. The bill would also repeal several older Part IV sections and move those positions into the new rules.

Sponsors & CoSponsors

Sponsor

Wyden, Ron [D-OR]

OR • D

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

No roll call votes available for this bill.

View on Congress.gov
Back to Legislation