# Prop. Treas. Reg. § 1.860G-1: Definition of regular and residual interests.

Proposed regulation, not in force. REG-118784-18, 84 FR 54068, published 2019-10-09 <https://www.federalregister.gov/documents/2019/10/09/2019-22042/guidance-on-the-transition-from-interbank-offered-rates-to-other-reference-rates>. Interprets 26 U.S.C. § 860G.

Par. 2. Section 1.860A-0 is amended by adding entries for § 1.860G-1(e) to read as follows:

Par. 3. Section 1.860G-1 is amended by adding paragraph (e) to read as follows:

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(e) Transition from interbank offered rates.

(1) In general.

(2) Change in reference rate for a regular interest after the startup day.

(3) Contingencies of rate on a regular interest.

(4) Reasonable expenses incurred to alter a regular interest.

(5) Applicability dates.

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(e) Transition from interbank offered rates —(1) In general. This paragraph (e) applies to certain interests in a REMIC that provide for a rate referencing an interbank offered rate. See § 1.1001-6 for additional rules that may apply to an interest in a REMIC that provides for a rate referencing an interbank offered rate.

(2) Change in reference rate for a regular interest after the startup day. An alteration to a regular interest in a REMIC that occurs after the startup day and that is described in § 1.1001-6(a)(1) or (3) is disregarded in determining whether the regular interest has fixed terms on the startup day under paragraph (a)(4) of this section.

(3) Contingencies of rate on a regular interest. An interest in a REMIC does not fail to qualify as a regular interest solely because it is subject to a contingency whereby a rate that references an interbank offered rate and is a variable rate permitted under paragraph (a)(3) of this section may change to a fixed rate or a different variable rate permitted under paragraph (a)(3) of this section in anticipation of the interbank offered rate becoming unavailable or unreliable.

(4) Reasonable expenses incurred to alter a regular interest. An interest in a REMIC does not fail to qualify as a regular interest solely because it is subject to a contingency whereby the amount of payments of principal or interest (or other similar amounts) with respect to the interest in the REMIC is reduced by reasonable costs incurred to effect an alteration or modification described in § 1.1001-6(a)(1), (2), or (3). In addition, payment by a party other than the REMIC of reasonable costs incurred to effect an alteration or modification described in § 1.1001-6(a)(1), (2), or (3) is not a contribution to the REMIC for purposes of section 860G(d).

(5) Applicability dates. (i) Paragraphs (e)(2) and (4) of this section apply with respect to an alteration or modification that occurs on or after the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register . However, taxpayers may apply paragraphs (e)(2) and (4) of this section with respect to an alteration or a modification that occurs before the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register . See section 7805(b)(7).

(ii) Paragraph (e)(3) of this section applies to a regular interest in a REMIC issued on or after the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register . However, a taxpayer may apply paragraph (e)(3) of this section to a regular interest in a REMIC issued before the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register . See section 7805(b)(7).