The Resource Section 385 proposed regulations would vitiate internal cash management operations

Section 385 proposed regulations would vitiate internal cash management operations

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Section 385 proposed regulations would vitiate internal cash management operations
Title
Section 385 proposed regulations would vitiate internal cash management operations
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Subject
Language
eng
Summary
On April 4, 2016, Treasury and the IRS Proposed Regulations under Section 385 (REG-108060-15). The Proposed Regulations intends to limit the effectiveness of certain tax planning techniques by recharacterizing certain related-party financings as equity, even when the financing is in the form of straight debt instruments. This article describes the Proposed Regulations and common treasury management practices of MNEs. It focuses on the application of the Proposed Regulations to one of those practices in particular: internal cash management. The broad issues discussed with respect to common practices include (1) how cash management transactions can easily trigger the per se recharacterization rules of the Proposed Regulations; (2) the consequences of recharacterizing internal funding transactions as equity; and (3) the extent to which the iterative application of the rules of the Proposed Regulations in the context of a global cash management system likely would recharacterize most cash pool balances as equity. This article identifies and describes significant technical interactions between the Proposed Regulations and the operations of cash pooling and intercompany financing arrangements that would have been extremely difficult for the drafters to have anticipated
Citation source
In: Journal of international taxation. - New York. - Vol. 27 (2016), no. 7 ; p. 26-64
http://library.link/vocab/creatorName
  • Harter, L.G
  • Hermann, J.A
  • Junge, A.H
Language note
English
http://library.link/vocab/subjectName
  • debt capital
  • equity capital
  • cash pooling
  • intercompany transaction
Label
Section 385 proposed regulations would vitiate internal cash management operations
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Label
Section 385 proposed regulations would vitiate internal cash management operations
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