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Tax News
Pete Stark Reintroduces Last Year's Currency Tax Bill
March 08, 2011
Legislative Actions
For those who do not remember, last year Pete Stark, a D- Cal Representative introduced H.R. 5783, the Investing in Our Future Act of 2010. That bill basically provided that currency transactions will be subject to a 0.005 percent tax on the value of the currency acquired in the transaction.  Last year this Bill did not go anywhere.  That did not stop Mr. Stark from reintroducing the Bill in the 112th Congress.  It doesn’t seem that much has changed from the previous installment.  The Bill, if it ever passes, could put a significant tax strain on hedge funds and private equity funds that engage in a large number/volume of currency transactions.  The term "currency transaction" is defined as (A) the exchange of any currency for another currency, and (B) entering into any currency derivative.  Given the definition of “currency transaction,” it looks like Mr. Stark envisions that an FX pair trade will be subject to tax twice, once when the transaction is opened, and once-more when it is closed. On the other hand, it seems that Mr. Stark proposes to tax derivative trades with a single layer of tax.  If indeed this reading is correct, it appears to be somewhat irrational. My guess would be that this legislation would never see the light of day, but it is worth keeping an eye on it considering the current state of the U.S. budget and revenue raising in general.
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Tags: H.R. 755, Investing in Our Future Act