April 12, 2016

More on “Inversions: New Final & Proposed Regulations on Related Party Debt”

Following up on my blog last week about the IRS and Treasury issuing new temporary regulations & final regulations that address inversion transactions and certain post-inversion transactions, here’s an excerpt from this Cleary Gottlieb memo (& see these other memos posted in our “Tax” Practice Area):

Recently released proposed regulations that would classify certain intragroup loans as equity for U.S. tax purposes could have very significant consequences for M&A transactions, private equity investments and restructurings. If adopted in their present form, the proposed regulations would eliminate strategies that have been widely used in cross-border transactions. However, the proposal could also have unpredictable consequences for the day-to-day funding practices of both U.S. and foreign-owned multinational groups. Moreover, the proposal would impose burdensome documentation and substantiation requirements on intragroup loans as a necessary condition to having the loans respected as debt for tax purposes (regardless of whether as a legal and economic matter the loans are debt).