What is a hedged executory contract? A “hedged executory contract” is another type of transaction that is eligible for integration under Code Section 988(d). A hedged executory contract results when a taxpayer enters into an...more
Are there special hedging provisions for section 988 transactions? Yes. In addition to the business hedging rules I address in our earlier Q&A with Andie series, a special hedging provision is available at Code section 988(d)...more
Do the tax hedge rules apply to consolidated tax groups? Yes. The Treasury Regulations treat members of a consolidated corporate group as divisions of a single entity. As a single entity, the risks and positions of all group...more
What are the tax accounting rules for hedges? Whether or not a qualified tax hedge is properly identified, it must be tax accounted for under a method that clearly reflects income. The timing of gains and losses on hedges...more
When must a hedge be identified and accounted for tax purposes? Taxpayers must identity each hedging transaction and the item it hedges. A taxpayer must clearly identify a hedging transaction “before the close of the day on...more
What is the “tax character” of a hedge? A taxpayer receives ordinary gain or loss on qualified hedges that have been properly identified in accordance with Treasury Regulation § 1.1221-2. This allows a taxpayer to ensure that...more
Enterprise Risk Management is widely used in many industries and businesses. Risk managers use increasingly sophisticated approaches, methods, analytics, and frameworks to manage complex, interrelated, and interconnected...more
The Inflation Reduction Act (IRA) of 2022 significantly changed the U.S. Federal income tax code, including introducing the new Corporate Alternative Minimum Tax (CAMT). The CAMT is a parallel tax system that applies to...more
Businesses often manage their price risks by hedging those risks with financial derivative contracts. Because businesses generate ordinary income and loss on their normal business activities, they want to be sure their...more
Complex financial products continue to present difficult issues for the Commission. In many instances the products involved are so complex that is may be questionable if any amount of policies, procedures and...more
During the latest webinar in our Energy Transition series, Partners Robert Lamkin and Jacob Hollinger hosted Louis Martinsen, vice president, origination at Boston Energy Trading and Marketing, for a 30-minute discussion...more
On March 2, McDermott Partners Robert Lamkin and Jacob Hollinger will host Louis Martinsen, vice president, origination at Boston Energy Trading and Marketing, to discuss hedge product opportunities for renewable and storage...more
In the second full week of the new year, the US Securities and Exchange Commission (SEC) settled an administrative action against Comprehensive Capital Management (CCM), a registered investment adviser, for, among other...more
The Internal Revenue Service (IRS) released Revenue Procedure 2020-44 to assist the market's transition from the London Interbank Offered Rate (Libor) and other interbank offered rates (IBORs) to alternative reference rates...more
The winter storm in Texas last month altered perceptions of the Texas electricity market (not to mention the heavy toll it took on the residents of Texas), including the reputation of renewable energy hedges. However, not all...more
Employing a “blend and extend” strategy to reduce near-term cash spend may be ideal in the current environment, but companies should also be aware of the associated hedge accounting implications....more
Since the end of 2017, we have been talking about the discontinuation of LIBOR as a reference rate for borrowers who finance with floating rate loans. The December 2021 end date is fast approaching, but much work remains to...more
Borrowers under variable rate commercial loans commonly enter into interest rate hedge agreements to eliminate or reduce their exposure to the interest rate risk of their variable debt service obligations. ...more
On October 9, 2019, the U.S. Department of the Treasury and the Internal Revenue Service proposed regulations (“Proposed Regulations”) addressing the transition from London interbank offered rate (“LIBOR”) to the use of...more
Wind farm owners and project sponsors have increasingly turned to corporate power purchase agreements (PPAs) and other hedging alternatives to secure predictable cash flows. Depending on the structure of these agreements,...more
Over the past few years, many merchant gas-fired power generation plants operating in the regional transmission organization, PJM Interconnection and in the New York Independent Service Operator (NYISO) areas have been...more
Synthetic power purchase agreements (PPAs) for renewable energy have emerged in recent years as a promising opportunity for corporations to reduce and stabilize their long-term energy costs and advance their sustainability...more
Opposition to the Clean Power Plan (CPP), promulgated by the EPA and championed by the Obama administration as a path to a cleaner energy future, recently came to a head as the Supreme Court granted opponents a stay halting...more
U.S. Structured Warrant Programs: Introduction - U.S. and non-U.S. banks have offered structured warrants in the U.S. to address the needs of both institutional and high-net worth investors. This article will...more
In a major step toward the implementation of a modern and competitive wholesale electricity market in Mexico (the "Wholesale Market"), on September 8, 2015 the Secretaría de Energía ("SENER") published the first set of...more