The Internal Revenue Service recently issued proposed regulations under Section 956 of the Internal Revenue Code (IRC) that may allow foreign subsidiaries of U.S. multinational corporate borrowers to provide additional credit support to lenders without resulting in adverse U.S. federal income tax consequences. Although the proposed regulations may be relied upon by taxpayers for taxable years beginning after Dec. 31, 2017, detailed analysis should be conducted prior to eliminating or modifying the standard limitations on foreign subsidiary pledges and guarantees from credit agreements.

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