November 23, 2016

AILA Members and Friends:

The Internal Revenue Service has eliminated one of the more troubling regulations affecting consumer finance companies, dealing with the 36-month “deemed discharge of indebtedness.” For the past several years, confusion has resulted as to whether the expiration of the 36-month rule is equivalent to the actual discharge of the indebtedness—resulting in uncertainty by creditors as to whether they may lawfully continue to pursue debt after issuance of a 1099-C based upon the 36-month deemed discharge.

The IRS has now issued its final rule that will eliminate the required issuance of form 1099-C based upon the finance company not receiving debt repayment for 36 months.

The final regulation applies to information returns and payee statements required to be filed after 12/31/2016. Therefore, for calendar year filers any 36-month expiration period that occurred during 2016, will no longer trigger the 1099-C filing. However, 1099-C’s must still be filed when debt is discharged. The remaining seven “identifiable events” that trigger information reporting obligations continue in full force and effect.

Happy Thanksgiving to all.


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