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