Today, the Appellate Tax Board (“ATB”) released its Findings of Fact and Report in the related cases of Massachusetts Mutual Life Insurance Company and MassMutual Holding LLC v. Commissioner and MML Investor Services, Inc. v. Commissioner, in which the ATB held that intercompany debt between MassMutual and its affiliates was true debt. As true debt, interest paid on the loan payments was deductible (subject to addback) in computing the net income measure of the corporate excise tax. MassMutual was also able to prove that the loan payments qualified for an exception to addback because the loan was bona fide debt primarily entered into for a valid business purpose, was supported by economic substance, and reflected fair value or consideration. A copy of the ATB’s decision can be found here: MassMutual v. Commissioner.
Reed Smith will provide more analysis of the MassMutual decision and its implications for other taxpayers in its upcoming quarterly update.