Treasury Department Publishes Final Regulations Regarding The Transition From LIBOR To Other Reference Rates

Background

LIBOR has been extensively used as an interest rate benchmark in debt instruments (such as loan agreements and bonds) and other financial instruments (such as swaps and other derivatives). In July 2017, the UK regulator tasked with overseeing the London Interbank Offer Rate (LIBOR) announced that publication of LIBOR may cease after the end of 2021. Therefore, contracts that use LIBOR or certain other Interbank Offered Rates (IBOR) as reference rates will need to be modified or amended to name a replacement rate, reference index or otherwise provide for a fallback rate. Various tax issues may arise when taxpayers modify contracts in anticipation of the discontinuance of LIBOR and other IBOR.