The IRS has issued final regs that provide guidance on the transition away from the use of interbank offer rates (“IBORs”) to other reference rates. Specifically, the regs provide the replacement rate for the IBOR presently used in the published rate election, which may be used by taxpayers to determine the amount of interest expense attributable to their excess U.S.-connected liabilities and allocable to income that is effectively connected with the conduct of a trade or business within the United States (“ECI”). (TD 9976)
The final regs should be read in conjunction with final regs issued in 2022 (TD 9961). The 2022 final regs did not finalize a proposed change to Reg §1.882-5(d)(5)(ii)(B), which these final regs do.
For more information regarding the transition away from phased-out IBORs, see Checkpoint’s Federal Tax Coordinator ¶I-1081.13.
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