IRS Finalizes Regulations on Allocation and Apportionment of Interest Expenses by Partners

The Internal Revenue Service has issued final regulations to provide guidance on the allocation and apportionment of interest expense by corporations that own a 10 percent or greater interest in a partnership, along with the allocation and apportionment of interest expense using the fair market value method.

The final regulations in TD 9676 also update the interest allocation regulations to conform to changes made by the Education Jobs and Medicaid Assistance Act of 2010, which affect the affiliation of certain foreign corporations.

The regulations affect corporate partners whose interest in the partnership is 10 percent or more, along with individual partners who are general partners or limited partners with an interest in the partnership of 10 percent or more.

In 2012, the IRS issued temporary regulations that revised some earlier temporary regulations dating back to 1988.

There were no comments received by the IRS on the temporary regulations nor did anyone request a public hearing, so the final regulations mostly adhere to the 2012 temporary regulations.