Recent Proposed Regulations Relating to Series Entities Would Address Primarily Domestic Series Entities and Generally Require Separate Entity Treatment

September 21, 2010
The IRS recently published proposed regulations that would treat each “series” of a domestic “series organization” as a separate entity for federal tax purposes. This treatment would apply regardless of whether the series is treated as a separate legal entity under local law. Separate entity treatment will result in greater deal structuring efficiency and flexibility. Series entities generally are viewed as a more efficient means of creating multiple special purpose vehicles. Separate entity treatment will allow one series to elect a federal tax classification separate from another series in the same series organization. With an exception for foreign series engaged in an insurance business, the proposed regulations would not apply to foreign series. This update examines the proposed regulations, which provide some degree of certainty in an area that previously offered none.