On October 13, 2016, the US Department of the Treasury and the Internal Revenue Service released final and temporary regulations under section 385 of the Internal Revenue Code (the “Regulations”) that contain rules requiring that certain related-party debt instruments be recharacterized as equity where specified documentation requirements are not satisfied or the debt instruments are issued under certain circumstances described in more detail below. While generally retaining the framework and key operative rules contained in the proposed section 385 regulations, issued on April 4, 2016 (including the “funding rule” and “per se funding rule”, which have been the subject of considerable criticism from commentators), the Regulations contain a number of meaningful changes and exceptions. In particular, the Regulations contain new exceptions for cash pooling arrangements, short-term loans, and instruments issued by foreign issuers.