Final rules remove “credit ratings” from regulations

The IRS on Thursday issued final regulations that remove all references to and all requirements of reliance on “credit ratings” from Treasury regulations (T.D. 9637). The regulations provide substitute standards of creditworthiness. They finalize rules that were issued in temporary form in 2011 to meet requirements mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203.

The regulations remove references to “credit ratings” and “credit agencies” and functionally similar terms from the regulations. Most of the changes to the regulations involve simple deletions and/or substitutions where the words “credit ratings” or “credit agencies” appear.

In some cases, sentences have been revised to remove credit rating references, but the preamble to the temporary regulations stated that where substitute language is provided, the IRS intends merely to conform to the requirements of the Dodd-Frank Act and that no substantive change is intended.

The changes affect the regulations under Secs. 150 (definitions), 171 (amortizable bond premium), 197 (amortization), 249 (limitation on deduction of bond premium on repurchase), 475 (mark-to-market valuation safe harbor), 860G (definitions related to real estate mortgage investment conduits), 1001 (determination of gain or loss), and 4101 (registration and bond for fuel manufacturers’ excise tax).

The regulations are effective Sept. 6.

—Alistair Nevius (anevius@aicpa.org) is the JofA’s editor-in-chief, tax.