The Internal Revenue Service has issued a revenue procedure that provides guidance on the tax treatment of certain internal debt that is required to be issued by intermediate holding companies to parent foreign holding companies to meet recently finalized total loss absorbing capacity, or TLAC, requirements.
As reported last week, the Fed approved a final rule prescribing the amount and form of both external and internal TLAC required for domestic global systematically important banks and the U.S. operations of foreign GSIBs. The revenue procedure provides guidance that internal TLAC will be treated as debt for tax purposes even though the TLAC instruments may have certain characteristics of equity that can be triggered in limited circumstances. For more information, contact ABA’s John Kinsella.
