IRS released final and temporary regulations under section 385

Published: 25 October 2016

The Internal Revenue Service (IRS) published last week final and temporary regulations under section 385 IRC (here), which are expected to be effective from 21 October when available in the Federal Register. As we noted in the AIMA Weekly News in April, the regulations are directed to various intercompany financing arrangements and their effects may be wide-ranging. The regulations recharacterise debt instruments between affiliates and establish extensive documentation requirements with respect to related-party indebtedness. Following comments from stakeholders and interested parties, the US Treasury seems to have accepted that a more targeted approach could be adopted, so that substantial changes have been made, some exceptions are included, such as for cash-pooling arrangements, and special treatment is given to some financial industry entities. AIMA will consider the impact the regulations may have for the alternative investment fund sector.  For further information, please contact Paul Hale, or Enrique Clemente.