Tax-exempt money market funds to be covered

The Department of the Treasury’s plan to back money market funds will include both taxable and tax-exempt funds. Participation in the program wouldn’t affect the tax treatment of payments, the Department of the Treasury said yesterday. On Friday, it unveiled a plan to provide support for money market funds should they fall below $1 in net asset value. The program is authorized to use up to $50 billion from the Exchange Stabilization Fund, which was created in 1934. The government program was launched following a week of record redemptions on money market funds with the announcement that the nation’s oldest money market fund, The Reserve Primary Fund, had lost value and “broke the buck.” The fund is offered by Reserve Management Corp. of New York. The Treasury Department released a statement Sunday to clarify its new program, stating that it will work with the Internal Revenue Service “to issue guidance that will confirm that participation in the temporary-guaranty program will not be treated as a federal guaranty that jeopardized the tax-exempt treatment of payments by tax-exempt money market funds.” The program also provides coverage to shareholders for amounts held by them as of the close of business Sept. 19.