The US Treasury Department and the Internal Revenue Service have issued final regulations aimed at curbing tax breaks claimed by many firms after emerging from bankruptcy.
The new regulations are effective as of May 10, and follow a similar pattern to rules proposed in 2003, which sought to clarify rules concerning the reduction of “tax attributes”. These include benefits such as net operating losses which firms can often utilize to reduce their post-bankruptcy tax liabilities.
The decision by the federal authorities has been seen by some as particularly pertinent given the recent controversy surrounding MCI, which had hoped to retain some $7 billion in tax breaks when it emerges from bankruptcy protection.
However, a source close to the MCI proceedings has informed Dow Jones Newswires that the new regulations will not affect the firm’s bankruptcy case, as they do not relate to consolidated tax returns.
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