After months of debate and thousands of public comments, the U.S. Treasury Department released earlier this month the much anticipated final and temporary Section 385 regulations. While the final and temporary regulations still call for reclassifying for U.S. income tax purposes certain instruments as equity that are in form debt, the recently released regulations do consider and incorporate some of the key changes requested by the public, including certain of the comments requested by the insurance industry.

Specifically, the final regulations significantly narrow and relax the proposed regulations by including a full exemption from the new rules for non-U.S. issuers and a partial exemption for "regulated insurance companies." The final regulations also include detailed responses to many insurance-specific comments submitted in response to the proposed regulations by insurance companies and trade associations.

A discussion of the final and temporary Section 385 regulations is available here, and a summary of how the global insurance industry's comments to the Proposed Regulations were addressed in the Final Regulations is available here.