James Tobin, a partner with EY's International Tax Services group, recently authored an article published in BNA's Tax Management International Journal discussing the extensive and very complex proposed regulations under Section 385 issued on April 4 (the Proposed Regulations).

According to the article, the Proposed Regulations apply to all related-party debt (generally an 80% common stock ownership threshold (by vote or value)), whether issued by a U.S. corporation, a foreign corporation (whether or not a CFC), a partnership, or a disregarded entity. The author further notes that it seems clear that Treasury's zeal in attempting to limit base erosion by foreign-owned U.S. corporations (whether or not qualifying as expatriated entities under Section 7874) distracted them from the complexities and collateral effects of the Proposed Regulations in the broader context and from the certain consequential commercial impacts which could be expected.

The article, published in the August 12, 2016, edition of Tax Management International Journal, is attached below.

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ATTACHMENT

Full text of BNA article