Treasury Department, Internal Revenue Service: Guidance on the Transition from Interbank Offered Rates to Other Reference Rates

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B-333891

March 9, 2022

The Honorable Ron Wyden
President
The Honorable Mike Crapo
Ranking Member
Finance Committee
United States Senate

The Honorable Richard Neal
President
The Honorable Kevin Brady
Ranking Member
Ways and Means Committee
House of Representatives

Topic: Treasury Department, Internal Revenue Service: Guidance on the Transition from Interbank Offered Rates to Other Reference Rates

Pursuant to Section 801(a)(2)(A) of Title 5 of the United States Code, here is our report on a major rule promulgated by the Department of the Treasury, Internal Revenue Service (IRS) titled “Guidance on the Transition from Interbank Offered Rates to Other Reference Rates” (RIN: 1545-BO91) We received the rule on January 3, 2022. It was published in the Federal Register as final settlement on January 4, 2022. 87 Fed. Reg. 166. The effective date is March 7, 2022.[1]

According to the IRS, the final rule provides guidance on the tax consequences of transitioning from the use of certain interbank offered rates on debt instruments, derivative contracts and other contracts. The IRS said the final rule is needed to address the possibility that changing the terms of a contract to replace such an offered interbank rate with a new benchmark rate could result in the realization of income, a deduction , a gain or loss to federal income. for tax purposes or may have other tax consequences. The IRS also said the final rule will affect parties to contracts that reference certain interbank offered rates.

Attached is our assessment of the IRS’ compliance with the procedural steps required by Title 5 Section 801(a)(1)(B)(i) through (iv) with respect to the rule. If you have any questions about this report or would like to contact GAO officials responsible for valuation work relating to the subject matter of the rule, please contact Shari Brewster, Assistant General Counsel, at (202) 512-6398.

Shirley A.Jones
Associate Legal Director

Pregnant

cc: Carrie E. Mudd
Director, Legal Processing Division
Treasury Department

PREGNANT

REPORT UNDER 5 USC § 801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
TREASURY DIRECTORATE,
INTERNAL REVENUE DEPARTMENT
ENTITLED
“GUIDELINES ON THE TRANSITION FROM INTERBANK
RATES OFFERED TO OTHER REFERENCE RATES »
(RIN: 1545-BO91)

(i) Cost-benefit analysis

In its submission to us, the IRS indicated that it had not prepared a cost-benefit analysis of this final rule.

(ii) Agency Actions Regarding the Regulatory Flexibility Act (RFA), 5 USC §§ 603–605, 607, and 609

The IRS has certified that this final rule will not have a significant economic impact on a significant number of small entities.

(iii) Agency Actions Regarding Sections 202-205 of the Unfunded Warrants Reform Act of 1995, 2 USC §§ 1532-1535

The IRS has determined that this final rule does not include any federal warrants that may result in expenditures by state, local, or tribal governments, or by the private sector, in excess of $100 million or more in 1995 dollars, adjusted for of inflation.

(iv) Other relevant information or requirements under laws and decrees

Administrative Procedure Act, 5 USC §§ 551 and following.

The IRS released a proposed rule on October 9, 2019. 84 Fed. Reg. 54068. The IRS said it received eight public comments on the proposed rule. The IRS provided a summary and responded to comments in the final rule.

Red Tape Reduction Act (PRA), 44 USC §§ 3501–3520

In its submission, the IRS said this final rule does not contain a collection of information requiring Office of Management and Budget (OMB) approval under the PRA.

Legal authorization of the rule

The IRS has promulgated this final rule pursuant to sections 148, 860G, 988, 1275, 7701 and 7805 of title 26 of the United States Code.

Executive Order No. 12866 (Planning and Regulatory Review)

The IRS said this final rule has been designated by the Office of Information and Regulatory Affairs as economically significant pursuant to the order under the memorandum of understanding (April 11, 2018) between the Department of Treasury and the OMB regarding the review of tax regulations.

Executive Order No. 13132 (Federalism)

The IRS said this final rule has no federalism implications and does not impose substantial direct compliance costs on state and local governments or prejudge state law within the meaning of the IRS. ‘order.

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