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Intercompany Loans between U.S. entities

Anon Anon's Profile

What are the rules regarding intercompany loans between U.S. entities (U.S. parent to U.S. sub)? I want to set up physical cash pooling in the U.S. between U.S. entities and am thinking about...

- Do I technically nees to track loans between U.S. entities? If so, why? What rules govern this?
- If yes, can there be no interest charged on the loan (0%)?
- Do the type of entities (Inc, LLC) matter?

Im just thinking about the administrative burden when no foreign entities are involved.

Thanks for your help in advance!

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Are the companies related? How are the tax returns organized?

Anon Anon
Title: Trsry
Company: Anon
(Trsry, Anon) |

Im new and so Im unsure how the tax returns are prepared/organized. It would be the ultimate parent company loaning down to its U.S. subsidiaries.

Not sure if that gives you the info you need. Can you elaborate on how the structure and tax preparation affects necessity for i/co loans? Or better yet point me to a resource if this is a basic question?
Thank you.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

It would be easier for you to contact your Public Accounting/Auditing firm and ask the question.

Typically if the subsidiaries are roll-ups, then no interest is charged since their cash is my cash. However, if they are not roll-ups, then intercompany loans are just that loans and interest should be charged.

Again, talk w/your public accounting firm to see what exact treatment they suggest for your situation.

Topic Expert
Jake Feldman
Title: Managing Director
Company: Global TaxFin Advisory Group LLC
(Managing Director, Global TaxFin Advisory Group LLC) |

Hi Anon,
If the affiliates are in different states, then you should charge interest on the intercompany loans under the same arm's length principle that applies to international transfer pricing rules because the different states will look for tax revenue on the interest income. If in same state, it can be interest-free.

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