Feb 6, 2020
On October 8, 2019, the US Internal Revenue Service released
proposed regulations addressing the US federal tax consequences of
replacing an interbank offered rate (IBOR) with a successor rate.
The proposed regulations generally provide the circumstances in
which the replacement of an IBOR with a fallback rate, or an
addition of a fallback mechanic to an existing instrument, will not
result in a deemed exchange of the instrument under Section 1001 of
the Internal Revenue Code of 1986, as amended. The proposed
regulations also provide guidance on other considerations with
respect to the transition away from IBORs. Mayer Brown partners
Russell Nance and Steven Garden and associate Brennan Young provide
an overview of the proposed regulations.