In early April, the Treasury Department and IRS released new proposed regulations under Section 385 of the Internal Revenue Code. They have been called “sweeping” and “dramatic” by tax experts and partners at major firms across the board — terms not usually associated with IRS regs. And they come as a bit of a surprise, having only been hinted to in earlier Treasury rule-making notices.
The new Section 385 regulations are so broad that they “fundamentally redefine the extent to which an intercompany instrument will constitute debt, irrespective of whether that group is inverted and who in the group issues it,” as Kevin M. Cunningham, managing director of KMPG in the International group, explains in a new Special Report for Thomson Reuters Checkpoint. (Disclosure: Thomson Reuters is FindLaw’s parent company.) Here’s what in-house counsel need to know.