Libor Steaming Toward June 2023 Transition

Highlights

• The federal government in the last two years has provided guidance for an orderly transition from the London Interbank Offered Rate (Libor) to other reference rates without resulting in significant modifications.
• The current U.S. dollar Libor publication is scheduled to end by June 30, 2023, giving parties time to modify existing debt instruments, derivative contracts and other contracts to replace references to existing Libor rates with alternative reference and fallback rates.
• Without the safe harbor protection of the LIBOR Regulations, such adjustments ordinarily could result in "significant modifications" for federal income tax purposes, potentially resulting in realization of income, deduction, gain or loss, or other federal income tax consequences to the parties associated with such instruments and contracts.