Final Treasury Regulations Facilitate Foreign Subsidiary Credit Support

Background

On May 23, the Department of the Treasury and the IRS published final regulations (the final regulations) under Section 956 of the Internal Revenue Code of 1986, as amended (the Code). The final regulations generally adopt proposed regulations under Section 956 that had been published on Nov. 5, 2018 (the proposed regulations),^[1] and provide additional technical guidance. The final regulations principally affect credit support provided by a controlled foreign corporation (CFC) with respect to debt of a domestic corporation (a corporate U.S. shareholder) that owns (or is deemed to own) 10 percent or more of the vote or value of the stock of the CFC. A foreign corporation is a CFC if more than 50 percent of the total vote or value of its stock is owned, actually or constructively, by 10 percent (by vote or value) U.S. shareholders. The final regulations provide welcome relief to taxpayers in the wake of the sweeping changes to the international tax