Qualified Derivative Payments with Respect to Securities Lending Transactions for Purposes of the Base Erosion and Anti-Abuse Tax Rules
Summary
SIFMA provided comments to the U.S. Department of the Treasury (DOT) and the Internal Revenue Service (IRS) on Qualified Derivative Payments with Respect to Securities Lending Transactions for Purposes of the Base Erosion and Anti-Abuse Tax Rules.
Excerpt
On December 18, 2025, the U.S. Department of the Treasury and the Internal Revenue Service (together, “Treasury”) released final regulations under Sections 59A and 6038A regarding how taxpayers are required to report qualified derivative payments (“QDPs”) with respect to securities lending transactions (the “Final QDP Reporting Regulations”) for purposes of the base erosion and anti-abuse tax (“BEAT”) rules. These regulations supplement previous guidance regarding the QDP reporting regulations, including proposed regulations regarding reporting of QDPs with respect to securities lending transactions (the “Proposed QDP Reporting Regulations”). 1
The Securities Industry and Financial Markets Association (SIFMA) 2appreciates the comprehensive guidance that Treasury has provided regarding the QDP reporting requirement, including the Final QDP Reporting Regulations. However, there is one aspect of the Final QDP Reporting Regulations, relating to the manner in which taxpayers can specifically identify QDPs on the securities leg of a securities lending transaction, which represents a significant change to, and limitation of, the rules for the specific identification method that were included in the Proposed QDP Reporting Regulations, and which will make it extremely difficult for taxpayers to make use of the specific identification method. We describe this change to the Final QDP Reporting Regulations, and the likely consequences that this change will have on the manner in which taxpayers will be required to report QDPs, to the detriment of both taxpayers and the government, in more detail below. We also set forth a specific recommendation for an amendment to the Final QDP Reporting Regulations which we believe will more appropriately tailor the specific identification method to ensure that QDPs, and only QDPs, are properly reported.
In light of the time it may take for Treasury to amend the Final QDP Reporting Regulations, and because taxpayers will be required to comply with the Final QDP Reporting Regulations for taxable years beginning on or after January 1, 2027, we recommend that Treasury issue a notice as soon as reasonably possible announcing its intention to amend the Final QDP Reporting Regulations to implement the recommendation set forth below and explicitly state in the notice that taxpayers are permitted to rely on the notice until final regulations are promulgated.
- 83 Fed. Reg. 65956 (Dec. 21, 2018); 84 FR 66968 (Dec. 6, 2019); 85 Fed. Reg. 64346 (Oct. 9. 2020); Notice 2024-43, 2024-25 I.R.B. 1737; 90 Fed. Reg. 3085 (Jan. 10, 2025).
- SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).