WASHINGTON - The Internal Revenue Service is delaying implementation of market-value accounting rules, giving smaller banks an opportunity to make their case for an exemption from the regulations.
The delay gives the industry nearly two months to convince the Treasury Department that most banks should not be classified as dealers - and therefore subject to market-value accounting rules - simply because they occasionally sell, mortgages or other loans.
"Thats super," said Kenneth A. Guenther, executive vice president of the independent Bankers Association of America. "In that period of time, there will be further discussion of that key point - who is a dealer."
Under the proposed IRS rule, banks would have had until Sept. 9 to designate which assets were being held for sale.
Banks would then be required to calculate unrealized gains and losses on those assets, and pay taxes on the gains.
Mr. Guenther said Treasury officials have expressed sympathy for two points the IBAA raised: the need to delay the implementation date for the tax rule and the question of who is a dealer.
The decision to delay the implementation date, Mr. Guenther said, suggests, the Treasury acquiesce to the industry on the question of who is a dealer.
The trade group executive said pressure for exempting banks from the dealer status would come from a number of organizations, from the Federal National Mortgage Association to the Small Business Administration, each of which depend upon banks selling assets into the secondary market.
The IRS said it acted because many taxpayers are having difficulty complying in time.