As we previously reported, one of the House Ways and Means Committee’s tax proposals for the Build Back Better Act would treat transfers between grantor trusts and their deemed owners as taxable exchanges. This proposal could be detrimental to the structured finance industry, because many securitizations and other borrowing transactions are effected by (1) one or more taxpayers’ contribution of a pool of assets to a grantor trust in exchange for ownership certificates and (2) the grantor trust’s issuance of debt securities backed by the pool of assets.

A number of industry participants have taken note. Recently, the Structured Finance Association (in which Cadwalader tax partners participate) suggested including an exclusion in the proposed legislation for structured finance transactions.