Bloomberg writes "SEC Said to Discuss Floating NAV for Money Funds With IRS". The article says, "Staff of the U.S. Securities and Exchange Commission have met with the Internal Revenue Service to discuss tax implications should money-market mutual funds adopt a floating share price, two people familiar with the talks said. Discussions have centered on the tax treatment of small gains and losses for investors in funds, said the people, who asked not to be named because the talks weren't public. IRS officials have told the securities regulator that they don't have much flexibility to interpret current tax law, one of the people said. The discussions suggest SEC staffers are developing a more detailed proposal to force money funds to adopt a floating share price, a move the industry has said would destroy their appeal. One such proposal prepared last year under the direction of former SEC Chairman Mary Schapiro was rejected by three of her four fellow commissioners in August, even before they were presented with a formal draft." The Bloomberg piece adds, "A floating share price may also create new accounting challenges for investors, although they could be directly addressed by the SEC, one of the people said. The agency has the authority to set accounting standards. The commission staff is grappling with concerns that a money fund with a floating share value might not be considered a cash equivalent, the person said. That could make them less attractive to institutional investors and businesses that need to hold a certain percentage of assets in cash. The SEC could propose to clarify the cash status of money funds as part of a new rule proposal, the person said."
