Joan C. Arnold Quoted in Tax Notes Today Article, 'Will Wal-Mart's Short-Term Loan Plan Drive Change?'
Joan C. Arnold, partner with Pepper Hamilton and chair of the firm's Tax Practice Group, was quoted in the July 13, 2015 Tax Notes Today article, "Will Wal-Mart's Short-Term Loan Plan Drive Change?"
That exception was limited by a rule that the loans could not be outstanding for more than 60 calendar days of the tax year. The 60-day rule allows "companies to clean up their balance sheet before the end of the year so that when they look at their covenants [on] bank loans, they are OK," Joan C. Arnold of Pepper Hamilton LLP said.
Arnold cited ILM 201516064 (Doc 2015-9272), which concluded that the short-term obligation exception provided by Notice 88-108 does not apply unless all obligations held by a CFC during the tax year meet the 60-day test, as evidence that the IRS "may not be as generous as one would think they would be" in applying the exception.
"I was struck by the fact in the Wal-Mart report someone said that it was an inappropriate use of bringing back foreign borrowings to reduce your financials to get better credit ratings," Arnold said. "That is exactly what the legislative history said you were supposed to be able to do." She argued that based on the legislative history of section 956, any changes to how the section operates would have to come legislatively.
"Whether or not a [section] 956 investment has been made is very rarely raised in an international audit," Arnold said, adding that section 956 "is very much a taxpayer self-regulated section. People who practice in this area worry about it, and we try and create structures that are consistent with what the legislative history told us we were supposed to be able to do. . . . It doesn't offend me as a planner to use that type of technique."
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