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Jeff Paravano, Paul Schmidt Comment on Pending Rules Regarding Intercompany Loans

News / March 24, 2017

Partners Jeff Paravano and Paul Schmidt are quoted in an article published March 21, 2017, by Bloomberg BNA’s “Daily Tax Report.” The article, “Issue: How to Document Loans for IRS Debt-Equity Rules,” discusses pending rules regarding intercompany loans and the documentation necessary to prevent the IRS from classifying such loans as debt under earnings-stripping rules.

Schmidt told Bloomberg BNA that the documentation clarification is important because companies often have lots of routine transactions that could be caught by the rules and it is “very unlikely” that these transactions would be appropriately characterized as equity. Unless the new administration decides to back off the rules, they would become effective Jan. 1, 2018.

Paravano said multinationals should be able to breathe a sigh of relief under President Trump. “Our expectation continues to be that Treasury will repeal the Section 385 regulations in their entirety and that congressional action will not be necessary,” he said.

“The sooner the rules are pulled back in some way, the better,” Schmidt added.

Read the article (registration required).