On May 8, 2015, the Internal Revenue Service ("IRS") and the Department of the Treasury ("Treasury") issued proposed and temporary regulations (the "Regulations") relating to the treatment of notional principal contracts ("NPCs") with nonperiodic payments.[1] The Regulations are designed to resolve questions that have arisen with the enactment of Dodd-Frank. The Regulations are a fundamental change in the treatment of NPCs. The rules apply to NPCs entered into on or after November 4, 2015, but taxpayers may apply the rules to NPCs entered into before November 4, 2015. The Regulations package also includes regulations under section 956 of the Internal Revenue Code of 1986 (the "Code").
While the Regulations are designed to resolve issues, many unanswered questions remain.
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