[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 2033 Introduced in Senate (IS)]

112th CONGRESS
  2d Session
                                S. 2033

     To amend the Internal Revenue Code of 1986 to end the costly 
       derivatives blended rate loophole, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 23, 2012

   Mr. Levin introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
     To amend the Internal Revenue Code of 1986 to end the costly 
       derivatives blended rate loophole, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Closing the Derivatives Blended Rate 
Loophole Act''.

SEC. 2. MODIFICATIONS TO TREATMENT OF SECTION 1256 CONTRACTS.

    (a) Elimination of Blended Capital Gain or Loss Treatment in Favor 
of Short-Term Capital Gain or Loss.--
            (1) In general.--Paragraph (3) of section 1256(a) of the 
        Internal Revenue Code of 1986 is amended to read as follows:
            ``(3) any gain or loss with respect to a section 1256 
        contract shall be treated as short-term capital gain or loss, 
        and''.
            (2) Conforming amendments.--Subsection (f) of section 1256 
        of such Code is amended by striking paragraphs (2), (3), and 
        (4) and by redesignating paragraph (5) as paragraph (2).
    (b) Conforming Amendments.--
            (1) Clause (iv) of section 988(c)(1)(E) of the Internal 
        Revenue Code of 1986 is amended to read as follows:
                            ``(iv) Treatment of certain currency 
                        contracts.--Except as provided in regulations, 
                        in the case of a qualified fund, any bank 
                        forward contract, any foreign currency futures 
                        contract traded on a foreign exchange, or to 
                        the extent provided in regulations any similar 
                        instrument, which is not otherwise a section 
                        1256 contract shall be treated as a section 
                        1256 contract for purposes of section 1256.''.
            (2) Subparagraph (A) of section 1212(c)(1) of such Code is 
        amended by striking ``preceding taxable year'' and all that 
        follows and inserting ``preceding taxable year, the amount so 
        allowed shall be treated as short-term capital loss from 
        section 1256 contracts.''.
            (3) Subparagraph (A) of section 1212(c)(6) of such Code is 
        amended by striking ``preceding taxable year'' and all that 
        follows and inserting ``preceding taxable year, the amount 
        allowed as a carryback shall be treated as short-term gain for 
        the loss year.''.
            (4) Subparagraph (B) of section 1212(c)(6) of such Code is 
        amended by striking ``or long-term''.
            (5) Subsection (f) of section 1256 of such Code is amended 
        by striking paragraphs (3) and (4) and by redesignating 
        paragraph (5) as paragraph (3).
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after the date of the enactment of this Act.
            (2) Conforming amendments.--The amendments made by 
        paragraphs (2), (3), and (4) of subsection (b) shall apply to 
        losses for taxable years beginning after the date of the 
        enactment of this Act.

SEC. 3. MODIFICATIONS TO TREATMENT OF DEALERS IN SECURITIES AND 
              COMMODITIES.

    (a) Modification of Definition of Security.--Paragraph (2) of 
section 475(c) of the Internal Revenue Code of 1986 is amended by 
striking the second sentence.
    (b) Required Mark to Market for Dealers in Commodities.--Subsection 
(e) of section 475 of the Internal Revenue Code of 1986 is amended--
            (1) by striking ``In the case of a dealer in commodities 
        who elects the application of this subsection, this section 
        shall apply to commodities held by such dealer'' in paragraph 
        (1) and inserting ``This section shall apply to commodities 
        held by a dealer in commodities'', and
            (2) by striking paragraph (3).
    (c) Commodities Derivatives Dealers.--Clause (i) of section 
1221(b)(1)(B) of the Internal Revenue Code of 1986 is amended by 
striking ``a note, bond, or other evidence of indebtedness, or a 
section 1256 contract (as defined in section 1256(b))'' and inserting 
``or a note, bond, or other evidence of indebtedness)''.
    (d) Technical Amendment.--Paragraph (1) of section 1402(i) of the 
Internal Revenue Code of 1986 is amended by striking ``subsection 
(a)(3)(A)'' and inserting ``subsection (a)(3)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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