IRS Proposes Rules on Derivatives Under Base-Erosion Tax (1)

The Treasury Department and the IRS on Friday proposed regulations on how certain derivative payments are treated under the base-erosion and anti-abuse tax, or BEAT.

The proposed regulations (REG-107895-24; RIN 1545-BR20) relate to “qualified derivative payments,” or QDPs, with respect to securities lending transactions. QDPs are payments to a company’s foreign affiliate related to a derivative on which the company recognizes a mark-to-market gain or loss.

Under the proposed rules, mark-to-market gains and losses on the securities leg of a securities lending transaction with a foreign related party wouldn’t be treated as QDPs and wouldn’t be subject to ...