One Step Back, One Step Forward: New Debt-Equity Regulations Narrow Their Focus On Earnings Stripping

Seyfarth Synopsis: On October 13, 2016 the IRS and Treasury Department published over 500 pages of final and temporary regulations under Code Section 385 (the "Final Regulations"). Drafted to curtail tax benefits accrued by multi-national companies utilizing inter-company debt, and issued a mere six months after the issuance of controversial proposed regulations (the "Proposed Regulations"), the Final Regulations largely maintain the structure of the Proposed Regulations. Nevertheless, the IRS and Treasury Department responded favorably to much of the commentary submitted by tax practitioners in response to the Proposed Regulations, and made several compromises that ease the burden, and alleviate some of the uncertainty, of the new rules.