[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4616 Introduced in House (IH)]

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117th CONGRESS
  1st Session
                                H. R. 4616

   To deem certain references to LIBOR as referring to a replacement 
 benchmark rate upon the occurrence of certain events affecting LIBOR, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 22, 2021

 Mr. Sherman introduced the following bill; which was referred to the 
 Committee on Financial Services, and in addition to the Committees on 
      Ways and Means, and Education and Labor, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
   To deem certain references to LIBOR as referring to a replacement 
 benchmark rate upon the occurrence of certain events affecting LIBOR, 
                        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 ``Adjustable Interest Rate (LIBOR) Act 
of 2021''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds that--
            (1) LIBOR is used as a benchmark rate in more than $200 
        trillion of contracts worldwide;
            (2) a significant number of existing contracts that 
        reference LIBOR do not provide for the use of a clearly defined 
        or practicable replacement benchmark rate when LIBOR is 
        discontinued; and
            (3) the cessation or non-representativeness of LIBOR could 
        result in disruptive litigation related to existing contracts 
        that do not provide for the use of a clearly defined or 
        practicable replacement benchmark rate.
    (b) Purpose.--It is the purpose--
            (1) of this Act--
                    (A) to establish a clear and uniform process, on a 
                nationwide basis, for replacing LIBOR in existing 
                contracts the terms of which do not provide for the use 
                of a clearly defined or practicable replacement 
                benchmark rate, without affecting the ability of 
                parties to use any appropriate benchmark rate in new 
                contracts;
                    (B) to preclude litigation related to existing 
                contracts the terms of which do not provide for the use 
                of a clearly defined or practicable replacement 
                benchmark rate; and
                    (C) to allow existing contracts that reference 
                LIBOR but provide for the use of a clearly defined 
                fallback and practicable replacement rate, to operate 
                according to their terms; and
            [(2) of section 6 to provide that modifications of existing 
        contracts pursuant to this chapter do not result in recognition 
        of gain or loss for Federal income tax purposes and to provide 
        authority to the Secretary of the Treasury to provide clear 
        guidance regarding the Federal income tax consequences of 
        transitioning contracts that reference IBORs to replacement 
        benchmark rates.]

SEC. 3. DEFINITIONS.

    As used in this Act, the following terms shall have the following 
meanings:
            (1) ``Benchmark'' shall mean an index of interest rates or 
        dividend rates that is used, in whole or in part, as the basis 
        of or as a reference for calculating or determining any 
        valuation, payment or other measurement.
            (2) ``Benchmark Administrator'' means a person that 
        publishes a Benchmark for use by third parties.
            (3) ``Benchmark Replacement'' shall mean a Benchmark, or an 
        interest rate or dividend rate (which may or may not be based 
        in whole or in part on a prior setting of LIBOR), to replace 
        LIBOR or any interest rate or dividend rate in LIBOR, whether 
        on a temporary, permanent, or indefinite basis, under or in 
        respect of a LIBOR Contract.
            (4) ``Benchmark Replacement Conforming Changes'' shall 
        mean, with respect to any LIBOR Contract, any documented 
        technical, administrative, or operational changes, alterations, 
        or modifications that, in the reasonable judgment of a 
        Calculating Person, are necessary or appropriate to permit the 
        administration and calculation of the Board-Selected Benchmark 
        Replacement under or in respect of such LIBOR Contract in a 
        manner consistent with relevant market practice or 
        recommendations for similar types of LIBOR Contracts and, to 
        the extent practicable, the manner in which such LIBOR Contract 
        was administered immediately prior to the LIBOR Replacement 
        Date.
            (5) ``Board'' means the Board of Governors of the Federal 
        Reserve System.
            (6)(A) ``Board-Selected Benchmark Replacement'' shall mean 
        a Benchmark Replacement identified by the Board that is based 
        on SOFR.
            (B) The Board shall adjust the Board-Selected Benchmark 
        Replacement for each category of LIBOR Contract that the Board 
        may identify to--
                    (i) apply to each LIBOR tenor; and
                    (ii) incorporate the relevant Tenor Spread 
                Adjustment. (C) For consumer loans, the Board-Selected 
                Benchmark Replacement shall initially reflect the 
                spread between the Board-Selected Benchmark Replacement 
                and LIBOR immediately before the LIBOR Replacement Date 
                and shall incorporate the relevant Tenor Spread 
                Adjustment over a one-year transition period.
            (7) ``Calculating Person'' shall mean, with respect to any 
        LIBOR Contract, any person (which may be the Determining 
        Person) responsible for calculating or determining any 
        valuation, payment, or other measurement based on a Benchmark.
            (8) ``Determining Person'' shall mean, with respect to any 
        LIBOR Contract, any person with the authority, right, or 
        obligation, including on a temporary basis, (as identified by 
        the provisions of the LIBOR Contract, or as identified by the 
        governing law of the LIBOR Contract, as appropriate) to 
        determine a Benchmark Replacement.
            (9) ``Fallback Provisions'' shall mean terms in a LIBOR 
        Contract for determining a Benchmark Replacement, including any 
        terms relating to the date on which the Benchmark Replacement 
        becomes effective.
            (10) ``LIBOR'' shall mean the overnight and 1-, 3-, 6-, and 
        12-month tenors of U.S. dollar LIBOR (formerly known as the 
        London interbank offered rate) as administered by ICE Benchmark 
        Administration Limited (or any predecessor or successor 
        thereof). LIBOR shall not include the 1-week or 2-month tenors 
        of U.S. dollar LIBOR.
            (11) ``LIBOR Contract'' shall mean, without limitation, any 
        contract, agreement, indenture, organizational documents, 
        guarantee, mortgage, deed of trust, lease, Security (whether 
        representing debt or equity, and including any interest in a 
        corporation, a partnership, or a limited liability company), 
        instrument, or other obligation or asset that, by its terms, 
        continues in any way to use LIBOR as a Benchmark as of the 
        applicable LIBOR Replacement Date.
            (12) ``LIBOR Replacement Date'' shall mean the first London 
        banking day after June 30, 2023, unless the Board determines 
        that any LIBOR tenor will cease to be published or cease to be 
        representative on a different date.
            (13) ``Security'' shall have the meaning assigned to such 
        term in section 2(a) of the Securities Act of 1933 (15 U.S.C. 
        77b(a)).
            (14) ``SOFR'' shall mean the Secured Overnight Financing 
        Rate published by the Federal Reserve Bank of New York (or a 
        successor administrator).
            [(15) ``Tax-Relevant IBOR'' shall mean LIBOR, any tenor of 
        non-U.S. dollar currency rates formerly known as the London 
        interbank offered rate as administered by ICE Benchmark 
        Administration Limited (or any predecessor or successor 
        administrator thereof), and any other interbank offered rates 
        that are expected to cease.]
            [(16) ``Tax-Relevant IBOR Contract'' shall mean, without 
        limitation, any contract, agreement, mortgage, deed of trust, 
        lease, Security (whether representing debt or equity, and 
        including any interest in a corporation, a partnership, or a 
        limited liability company), instrument or other obligation that 
        uses an IBOR as a Benchmark.]
            (17) ``Tenor Spread Adjustment'' shall mean--
                    (A) 0.00644 percent for overnight LIBOR;
                    (B) 0.11448 percent for 1-month LIBOR;
                    (C) 0.26161 percent for 3-month LIBOR;
                    (D) 0.42826 percent for 6-month LIBOR; and
                    (E) 0.71513 percent for 12-month LIBOR.

SEC. 4. LIBOR CONTRACTS.

    (a) On the LIBOR Replacement Date, the Board-Selected Benchmark 
Replacement shall, by operation of law, be the Benchmark Replacement 
for any LIBOR Contract that, after giving any effect to subsection (b), 
contains no Fallback Provisions.
    (b) On the LIBOR Replacement Date, any Fallback Provisions in a 
LIBOR Contract that provide for a Benchmark Replacement that is based 
in any way on any LIBOR value or require a person (other than a 
Benchmark Administrator) to conduct a poll, survey, or inquiries for 
quotes or information concerning interbank lending or deposit rates 
shall be disregarded as if not included in such LIBOR Contract and 
shall be deemed null and void and without any force or effect.
    (c) Subject to subsection (g)(2), a Determining Person shall have 
authority under this Act, but shall not be required, to select the 
Board-Selected Benchmark Replacement as the Benchmark Replacement.
    (d) Any selection by a Determining Person of the Board-Selected 
Benchmark Replacement pursuant to subsection (c) shall be--
            (1) irrevocable;
            (2) made by the earlier of the LIBOR Replacement Date and 
        the latest date for selecting a Benchmark Replacement according 
        to the terms of such LIBOR Contract; and
            (3) used in any determinations of the Benchmark under or in 
        respect of such LIBOR Contract occurring on and after the LIBOR 
        Replacement Date.
    (e) If a Determining Person has authority to select the Board-
Selected Benchmark Replacement under subsection (c) but does not select 
a Benchmark Replacement by the date specified in subsection (d)(2), 
then, on the LIBOR Replacement Date, the Board-Selected Benchmark 
Replacement shall, by operation of law, be the Benchmark Replacement 
for the LIBOR Contract.
    (f) If the Board-Selected Benchmark Replacement becomes the 
Benchmark Replacement for a LIBOR Contract pursuant to subsection (a), 
(c), or (e) then all Benchmark Replacement Conforming Changes shall 
become an integral part of such LIBOR Contract by operation of law. For 
the avoidance of doubt, a Calculating Person shall not, unless 
explicitly required under the terms of the LIBOR Contract, be required 
to obtain consent from, or give advance notice to, any other person 
prior to the adoption of Benchmark Replacement Conforming Changes.
    (g) The provisions of this Act shall not alter or impair--
            (1) any written agreement specifying that a LIBOR Contract 
        shall not be subject to this Act;
            (2) any LIBOR Contract that contains Fallback Provisions 
        that identify a Benchmark Replacement that is not based in any 
        way on any LIBOR value (including, but not limited to, the 
        prime rate or the Effective Federal Funds Rate), except that 
        such LIBOR Contract shall be subject to subsection (b);
            (3) any LIBOR Contract subject to subsection (c) as to 
        which a Determining Person does not elect to use a Board-
        Selected Benchmark Replacement pursuant to subsection (c), 
        except to the extent that such LIBOR Contract is subject to 
        subsection (b) or (e);
            (4) the application to a Board-Selected Benchmark 
        Replacement of any cap, floor, modifier, or spread adjustment 
        to which LIBOR had been subject pursuant to the terms of a 
        LIBOR Contract; or
            (5) any provisions of Federal consumer financial law as 
        defined in section 1002 of the Dodd-Frank Wall Street Reform 
        and Consumer Protection Act (12 U.S.C. 5481), and any Benchmark 
        Replacement and the transition to it must be in accordance with 
        such law.

SEC. 5. CONTINUITY OF CONTRACT AND SAFE HARBOR.

    (a) A Board-Selected Benchmark Replacement and the selection or use 
of a Board-Selected Benchmark Replacement as a Benchmark Replacement 
under or in respect of a LIBOR Contract, as well as any Benchmark 
Replacement Conforming Changes, by operation of section 4 shall 
constitute--
            (1) a commercially reasonable replacement for and a 
        commercially substantial equivalent to LIBOR;
            (2) a reasonable, comparable, or analogous rate, index, or 
        term for LIBOR;
            (3) a replacement that is based on a methodology or 
        information that is similar or comparable to LIBOR;
            (4) substantial performance by any person of any right or 
        obligation relating to or based on LIBOR; and
            (5) a replacement that has historical fluctuations that are 
        substantially similar to those of LIBOR for purposes of the 
        Truth in Lending Act and its implementing regulations.
    (b) Neither of (1) the selection or use of a Board-Selected 
Benchmark Replacement as a Benchmark Replacement or (2) the 
determination, implementation, or performance of Benchmark Replacement 
Conforming Changes, in each case by operation of section 4, shall (A) 
be deemed to impair or affect the right of any person to receive a 
payment, or to affect the amount or timing of such payment, under any 
LIBOR Contract or (B) have the effect of (i) discharging or excusing 
performance under any LIBOR Contract for any reason, claim, or defense 
(including, but not limited to, any force majeure or other provision in 
any LIBOR Contract), (ii) giving any person the right to unilaterally 
terminate or suspend performance under any LIBOR Contract, (iii) 
constituting a breach of any LIBOR Contract, or (iv) voiding or 
nullifying any LIBOR Contract.
    (c) No person shall be subject to any claim or cause of action in 
law or equity or request for equitable relief, or have liability for 
damages, arising out of or related to the selection or use of a Board-
Selected Benchmark Replacement or the determination, implementation, or 
performance of Benchmark Replacement Conforming Changes, in each case 
by operation of section 4; provided, however, that any person 
(including a Calculating Person) shall remain subject to any existing 
[legal, regulatory, or contractual] obligations to correct servicing or 
other ministerial errors under or in respect of a LIBOR Contract.
    (d) The selection or use of a Board-Selected Benchmark Replacement 
or the determination, implementation, or performance of Benchmark 
Replacement Conforming Changes, in each case by operation of section 4, 
shall not be deemed to--
            (1) be an amendment or modification of any LIBOR Contract; 
        or
            (2) prejudice, impair, or affect any person's rights, 
        interests, or obligations under or in respect of any LIBOR 
        Contract.
    (e) Except as provided in either subsections (a), (b), or (c) of 
section 4, the provisions of this Act shall not be interpreted as 
creating any negative inference or negative presumption regarding the 
validity or enforceability of--
            (1) any Benchmark Replacement (including any method for 
        calculating, determining, or implementing an adjustment to the 
        Benchmark Replacement to account for any historical differences 
        between LIBOR and the Benchmark Replacement) that is not a 
        Board-Selected Benchmark Replacement; or
            (2) any changes, alterations, or modifications to or in 
        respect of a LIBOR Contract that are not Benchmark Replacement 
        Conforming Changes.

[SEC. 6. TAX TREATMENT AND TAX REGULATIONS FOR IBOR TRANSITION.

    [(a) None of--]
            [(1) the selection or use of a Board-Selected Benchmark 
        Replacement as a Benchmark Replacement,]
            [(2) the determination, implementation or performance of 
        Benchmark Replacement Conforming Changes, or]
            [(3) the application to any LIBOR Contract of, or the 
        agreement by parties thereto to terms consistent with, section 
        4,]
shall be treated as a sale, exchange, or other disposition of property 
for purposes of section 1001 of the Internal Revenue Code of 1986.
    [(b) Not later than 180 days after the date of enactment of this 
Act, the Secretary of the Treasury shall issue such regulations as may 
be necessary or appropriate to carry out subsection (a) and address the 
Federal income tax consequences of transitioning a Tax-Relevant IBOR 
Contract to a replacement benchmark rate. Such regulations shall 
[prioritize a smooth transition from the use of a Tax-Relevant IBOR]/
[balance the need for a smooth transition from the use of a Tax-
Relevant IBOR with the prevention of inappropriate tax planning].]

SEC. 7. PREEMPTION.

    (a) This Act and the regulations hereunder shall supersede any and 
all laws, statutes, rules, regulations, or standards of any State, the 
District of Columbia, or any territory or possession of the United 
States, insofar as they provide for the selection or use of a Benchmark 
Replacement or related conforming changes.
    (b) No provision of State or local law that expressly limits the 
manner of calculating interest, including the compounding of interest, 
shall apply to the selection or use of a Board-Selected Benchmark 
Replacement or Benchmark Replacement Conforming Changes.

SEC. 8. TRUST INDENTURE ACT OF 1939.

    Section 316 of the Trust Indenture Act of 1939 (15 U.S.C. 77ppp) is 
amended--
            (1) by striking ``and'' after ``of subsection (a),'' in 
        subsection (b); and
            (2) by inserting ``, and except that the right of any 
        holder of any indenture security to receive payment of the 
        principal of and interest on such indenture security shall not 
        be deemed to be impaired or affected by any change occurring by 
        the application of section 4 of the Adjustable Interest Rate 
        (LIBOR) Act of 2021 to any indenture security'' after ``subject 
        to such lien'' in subsection (b).

SEC. 9. SPECIAL ALLOWANCE PAYMENTS FOR LEGACY FEDERAL STUDENT LOANS.

    Section 438(b)(2)(I) of the Higher Education Act (20 U.S.C. 1087-
1(b)(2)(I)) is amended by striking ``of the 1-month London Inter Bank 
Offered Rate (LIBOR) for United States dollars in effect for each of 
the days in such quarter as compiled and released by the British 
Bankers Association'' and inserting ``of 1-month LIBOR for United 
States dollars in effect for each of the days in such quarter as 
administered by ICE Benchmark Administration Limited (or any successor) 
or (as determined by the Secretary) any replacement benchmark rate for 
contracts established by the Board of Governors of the Federal Reserve 
System under the Adjustable Interest Rate (LIBOR) Act of 2021.''.

SEC. 10. RULEMAKING.

    Not later than 180 days after the date of enactment of this Act, 
the Board shall issue such regulations as may be necessary or 
appropriate to enable it to administer and carry out the purposes of 
this Act, other than section 6.
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