I 111th CONGRESS 1st Session H. R. 3153 IN THE HOUSE OF REPRESENTATIVES July 9, 2009 Mr. Larson of Connecticut introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to impose a tax on over-the-counter derivatives transactions, and for other purposes.

1.

Short title

This Act may be cited as the Transparent Markets Act of 2009.

2.

Over-the-counter derivatives transaction tax

(a)

In general

Chapter 36 of the Internal Revenue Code of 1986 is amended by inserting after subchapter B the following new subchapter: C

Tax on Over-the-Counter Derivatives

Sec. 4475. Tax on over-the-counter derivatives.

4475.

Tax on over-the-counter derivatives

(a)

Imposition of tax

There is hereby imposed a tax on each covered derivative transaction. (b)

Rate of tax

The rate of such tax shall be equal to 0.25 percent of the fair market value of the underlying property with respect to, or the notional principal amount of, the derivative financial instrument involved in such transaction. (c)

By whom paid

All parties to a covered derivative transaction shall be jointly and severally liable for the tax imposed on such transaction by this section. (d)

Covered derivatives transaction

For purposes of this section, the term covered derivative transaction means becoming a party to a derivative financial instrument which is not traded on (or subject to the rules of) a qualified board or exchange (as defined in section 1256(g)(7), determined without regard to subparagraph (C) thereof). (e)

Derivative financial instrument

For purposes of this section— (1)

In general

The term derivative financial instrument means any option, forward contract, short position, notional principal contract, credit default swap, or similar financial instrument in any— (A)share of stock in a corporation, (B)partnership or beneficial ownership interest in a widely held or publicly traded partnership or trust, (C)note, bond, debenture, or other evidence of indebtedness, (D)commodity which is actively traded (within the meaning of section 1092(d)(1)), (E)any foreign currency, or (F)any specified index. (2)

Specified index

The term specified index means any one or more or any combination of— (A)a fixed rate, price, or amount, or (B)a variable rate, price, or amount which is based on any current, objectively determinable information which is not within the control of any of the parties to the contract or instrument and is not unique to any of the parties’ circumstances.(f)

Method of collection

(1)

In general

The tax imposed by subsection (a) shall be collected on the basis of an annual return. (2)

Content of return

Such return shall include the following information: (A)A description of the derivative financial instrument involved in such transaction. (B)The parties to the covered derivatives transaction (and each such party’s tax residence). (C)The fair market value of the underlying property with respect to, or the notional principal amount of, the derivative financial instrument involved in such transaction. (D)A description of any underlying asset or specified index with respect to such transaction, including a description of how each party to such transaction characterizes any such asset for tax purposes. (E)A description of any provision for physical settlement of such transaction. (g)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including the following: (1)Prescribing the time for filing the annual return of tax imposed under subsection (a) and the time for payment of such tax. (2)Excluding or including certain transactions from such tax as may be consistent with the purposes of this section. (3)Guidance for determining such tax if the fair market value or notional principal amount is unclear on the face of the instrument.

. (b)

Clerical amendment

The table of subchapters for chapter 36 of such Code is amended by inserting after the item relating to subchapter B the following new item: Subchapter C. Tax on over-the-counter derivatives . (c)

Report

(1)

In general

Not later than 180 days after the first deadline established by the Secretary of the Treasury for filing a return of the tax imposed under section 4475 of the Internal Revenue Code of 1986, and each deadline for filing such return thereafter, the Secretary shall submit a report to Congress. (2)

Content

Such report shall include— (A)a description and a statistical analysis of the information included on the returns of such tax for the previous filing period, and (B)a detailed analysis of the scope and nature of over-the-counter derivatives markets and the feasibility and advisability of regulating such markets. (d)

Effective date

The amendments made by this section shall apply to transactions entered into on or after the date of the enactment of this Act.