Dechert Develops REMIC Structure For Longer Investment Periods ("Pancake REMIC")

Mortgage securitizations must navigate a number of U.S. income tax issues to optimize financing efficiency. Key issues include avoiding entity-level taxation of the issuer, which involves addressing the taxable mortgage pool ("TMP") and publicly traded partnership ("PTP") rules. If a non-U.S. investor will hold securities issued in the securitization, consideration must be given to the U.S. withholding tax provisions and the applicability of an exemption through the portfolio interest exemption or qualification for a reduction or exemption under an income tax treaty with the United States. In addition, if a non-U.S. investor will hold an equity interest issued in the securitization, consideration must be given to the question of whether the non-U.S. investor will be treated as engaged in a trade or business within the United States and subject to U.S. income tax as a result of holding that equity interest.