The Internal Revenue Service gives its regards to disregarded entities - the proposed conduit financing regulations

On 19 December 2008, the US Treasury Department and the IRS issued proposed regulations under the conduit financing provisions of Sec. 7701(l) of the Internal Revenue Code and Treasury Regulation Sec. 1.881-3, which address primarily financing arrangements that are effected through entities that are generally disregarded under US tax law, such as "check-the-box" branches. In general terms, the proposed regulations take the view that an entity that is generally disregarded for US tax purposes can nevertheless be a "person" for purposes of the conduit financing rules. This article considers the implications of the proposed regulations on US tax planning.