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Legislative Updates: April 2013


Capitol Call

Spring has swept the Capitol. Over at the Securities and Exchange Commission, Chairman Mary Jo White has started her new job after receiving wide bipartisan support at her confirmation on April 8. The cherry blossoms finally bloomed in late March, and the Nationals and Orioles started their 2013 seasons.

There are, however, some dark clouds on the horizon in the form of President Obama’s FY2014 budget, which was released on April 10. The budget includes a proposal to mark-to-market all derivative contracts at year-end. Similar to the draft legislative proposal put forth by House Ways and Means Committee Chairman Dave Camp (R-MI) that has been the subject of much industry attention recently, the Administration’s budget retains the concept of treating a stock as if it were sold when it becomes part of a straddle transaction with a derivative contract, with the pre-existing gain on the stock recognized at that time and the loss recognized when the stock is actually sold.

Unlike the Ways and Means Committee and its public appeal for stakeholder input, the Senate Finance Committee has been quiet on its plans to overhaul the tax code. Senate Finance Committee Chairman Max Baucus (D-MT) threw the tax reform debate a curveball by announcing on April 23 that he would not seek reelection. Some see his announcement as boosting the chances of tax reform because he will be free to make tough decisions without the fear of how those decisions might impact his reelection chances.

Other observers believe that this whole exercise is a lost cause because Republicans will not eliminate tax "loopholes" without insisting on a reduction in both individual and corporate tax rates. Most Democrats, meanwhile, appear to see an overhaul of the tax code as a golden opportunity to raise the revenues needed to pay for the many government programs that have been cut or reduced over the years. The last major tax code overhaul was in 1986, so the task is formidable.

But Chairmen Camp and Baucus remain undaunted, at least publicly, in their quest to reform the tax code, as they wrote in an April 8 op-ed in the WSJ about their goals and their commitment to passing legislation out of their respective committees by August. It would be unwise to count them out, because both members desperately want to make tax reform part of their legacies in Congress.

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