On April 4, 2016, the U.S. Treasury Department and the IRS issued proposed regulations (REG-108060-15) under section 385 of the Internal Revenue Code that will impact any corporation that issues a purported debt instrument to related corporations or partnerships. Specifically, the proposed rules contain three major elements:
At least one Government representative has described these proposed regulations as “intended to be disruptive.” Almost every corporate taxpayer (including partnerships owning or owned by corporations) will be impacted in some way by these rules.
While the proposed rules generally will become effective upon the issuance of final regulations, certain aspects will be retroactive to April 4, 2016. Taxpayers will have only 90 days after the issuance of final regulations to ensure that instruments issued after April 4 comply.
In light of the apparent imminence of the final rules and the limited transition period, True Partners recommends that companies should begin the compliance process immediately by taking the following steps:
We recognize that these steps will likely be time consuming and will require "heavy lifting" by your internal teams. True Partners Consulting has the people and expertise to step in and help wherever needed.
Additional questions about Section 385 and how it may affect you? Contact any of the team members below.
John V. Aksak, Managing Director
John P. Bennecke, Regional Managing Director and National Practice Leader
Michael Chen, Managing Director
Robert Gordon, Managing Director
Ron Tambasco, Managing Director
Ross J. Valenza, Managing Director