Wall Street Tax Act of 2025
The Wall Street Tax Act of 2025 would create a new national tax on trading in securities and certain derivative contracts. It would impose a small transaction tax (ranging from 0.02% to 0.10% over time) on each covered transaction, using the fair market value of the security (or the payment amount for derivatives) as the base. The tax would apply to transactions involving U.S.-listed securities or U.S. persons trading derivatives and would be administered in coordination with the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). There are notable exemptions (for initial issuance of securities and certain short-term debt), and the bill includes rules about who collects and pays the tax, how derivatives are treated as separate transactions, and special rules for controlled foreign corporations (CFCs) with U.S. shareholders paying the tax pro rata. In short, the bill would broadly tax most securities trades and many derivative trades in U.S. markets, with gradually increasing rates beginning after 2025, and it sets up a framework for administration, reporting, and anti-avoidance measures to prevent shifts or evasion.
Key Points
- 1Tax subject and rates: A new Subchapter C imposes a tax on each covered trading transaction with respect to a security. The rate is tiered by year: 0.02% (2026), 0.04% (2027), 0.06% (2028), 0.08% (2029), and 0.10% (from 2030 onward) of the specified base amount.
- 2What counts as a "covered transaction" and base amount: Covered transactions include purchases on US-based exchanges or by U.S. persons, and certain derivative transactions (if traded on US-based venues or rights under the derivative involve a U.S. person). The base amount is the fair market value of the security at the time of the transaction, or the payment amount for derivatives.
- 3Exemptions and special rules: There is no tax on the initial issuance of securities (IPOs, bond issues, etc.). Certain short-term debt (with fixed maturity of ≤100 days) traded on US exchanges is also exempt. Derivatives have defined exceptions and may be treated as separate transactions for tax purposes.
- 4Who pays the tax: For trades on US exchanges, the exchange pays the tax; for certain direct purchases by a US broker, the broker pays. If a transaction doesn’t fit those categories, the purchaser or seller (or the payor/payee, depending on US status) must pay, with allocation rules based on whether a US person is involved.
- 5Derivatives and treatment: The bill defines derivatives broadly (options, forwards, futures, swaps, etc.) and provides rules for embedded derivatives, separation of derivative payments as separate transactions, and special treatment of certain real property and financing-related instruments.
- 6CFC treatment: Controlled Foreign Corporations are treated as US persons for purposes of this tax, with US shareholders responsible for paying their pro rata share of tax in certain cross-border scenarios.
- 7Administration and reporting: The Secretary (Treasury) is to administer the tax in consultation with the SEC and CFTC, issue guidance, and issue regulations to prevent avoidance, including the use of non-US persons in transactions. Information reporting related to CFCs is amended to cover these trading transactions.