Final IRS Debt-Equity Reg Package Still Leaves State Questions


Peter Faber said that the states may not apply the new Section 385 debt-equity regulations in situations where corporations file separate federal and combined state returns. “I believe that the states are not bound to follow the 385 regs, even when the corporations’ state filing status is the same as their federal filing status,” Mr. Faber noted, adding that “the states have never considered themselves to be bound by IRS interpretations of the code.”