Daily Tax Update - July 15, 2014: Treasury, IRS Issue Final Regulations Governing Allocation and Apportionment of Interest Expense

Treasury, IRS Issue Final Regulations Governing Allocation and Apportionment of Interest Expense:  Today, the Department of Treasury and Internal Revenue Service released final regulations (TD 9676) addressing the allocation and apportionment of interest expense, including rules addressing allocation and apportionment by corporations owning a 10 percent or greater interest in a partnership and allocation and apportionment using the fair market value method.  The regulations also update the interest allocation rules to reflect section 216 of unnamed 2010 legislation (commonly referred to as the Education Jobs and Medicaid Assistance Act), which provides that if more than 50 percent of a foreign corporation’s gross income is effectively connected income and at least 80 percent of either the vote or value of all outstanding stock of such foreign corporation is owned directly or indirectly by members of the affiliated group, then all of the foreign corporation’s assets and interest expense are taken into account for the purposes of allocating and apportioning the interest expense of the affiliated group.  The final regulations are generally effective for taxable years beginning on or after July 16, 2014.

The regulations can be accessed via: TD 9676.pdf

House Passes Highway Funding Bill:  The House approved H.R. 5021 – the Highway and Transportation Funding Act of 2014.  In remarks today, Ways and Means Chairman Dave Camp said, “The bill before us today, H.R. 5021, will provide enough funding to get us through May 31, 2015, giving states the ability to complete transportation projects.  This bill is the only package with all provisions having a proven history of getting big bipartisan votes in both the House and Senate.   The three provisions - pension smoothing, customs user fees and leaking underground storage tanks - have all been used previously in bills that received strong bipartisan votes.”  Camp added, “A long-term solution would be my preference, and an important feature of my tax reform discussion draft would provide enough revenue to maintain the solvency of the Highway Trust Fund for eight years.  In the meantime, I hope all Members of Congress can work on a longer-term solution by the end of May next year.  This will not be an easy task, so it is important that Congress has time to have a deliberative, open debate about bipartisan solutions rather than trying to hit Americans, who are already paying more for gas, with a gas tax hike.”