The Committee on Federal Taxation of the Securities Industry Association (SIA)* provides comments to the Internal Revenue Service (IRS) on proposed regulations that would establish book/tax conformity safe harbor under Section 475 of the Internal Revenue Code (the Code), proposed Treasury regulation section 1.475(a)-4, published in the Federal Register on May 24, 2005.

The proposed safe harbor would allow dealers in securities of over-the-counter (OTC) derivatives to mark their positions to market for tax purposes using the same values that they use for financial accounting, and other purposes.

SIA believes that the proposed safe harbor would provide a workable process for auditing taxpayer compliance under Section 475 of the Code. SIA shares concerns that some of the proposed requirements for the safe harbor may limit its utility.

*SIFMA is the product of a merger between the Securities Industry Association (SIA) and The Bond Market Association (TBMA) in 2006.