Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 05 - Division of Revenues
1998-1 - Comprehensive Corporation Income Tax Regulations
Rule 26-51-440 - FASITs
Rule 3.26-51-440 - Qualification Requirements
Current through Register Vol. 49, No. 9, September, 2024
To qualify for status as a FASIT, an entity must meet several requirements, which are specifically set forth at IRC Sec. 860L(a)(1). Any entity, including a corporation, partnership or trust may be treated as a FASIT.
The ownership of a FASIT (that is, the "ownership interest"), must be held directly by an "eligible corporation." IRC Sec. 860L(a)(1)(C). An eligible corporation is a nonexempt domestic C corporation which does not qualify as a RIC, REIT, REMIC or cooperative.
Moreover, the ownership interest of a FASIT must generally be entirely held by a single domestic C corporation. IRC Sec. 860L(a)(2).
The FASIT issues debt instruments, called "regular interests," which are in the nature of bonds. These regular interests would normally be purchased by investors and feature the following characteristics:
a. The investor is unconditionally entitled to receive a specified amount of principal;
b. Interest is paid on the principal;
c. A stated term to maturity of usually no more that 30 years; and
d. In some cases, a FASIT may issue a high-yield interest rather than a regular interest. The tax treatment to investors of a high-yield interest is different from a regular interest. IRC Sec. 860L(b)(1)(B).
For an entity to qualify as a FASIT, substantially all of its assets must consist of "permitted assets" as defined at IRC Sec. 860L(c)(1). The assets of a FASIT are considered to be owned directly by the holder of the ownership interest.
