In a letter today, the American Bankers Association urged the IRS to make several changes to proposed regulations concerning bad debt deductions for regulated financial companies and members of regulated financial groups. The IRS late last year proposed updating the standard for determining when a debt instrument held by financial companies will be conclusively presumed to be worthless under Section 166 of the tax code. ABA said the proposal contains useful guidance but saw several areas for improvement.
Among its recommendations, ABA suggested the IRS consider an expansive description of accounting for credit losses of debt instruments subject to Section 166. ABA also recommended removing references to the phrase “loss asset”; expanding the application of the new charge-off method to U.S. branches of foreign banks and consolidated REITs; permitting flexibility accounting method changes for the new charge-off method; and clarifying the future role of IRS Large Business and International Division Directives.
