The New York State Bar Association’s Tax Section has recently released two new reports concerning (1) amendments to section 4968 and (2) selected issues under section 108(e)(6):

• Report Number 1529 (Report on Amendments to Section 4968):

This report . . . of the New York State Bar Association Tax Section comments on the amendments made to Section 49682 by Public Law 119-21, commonly known as the One Big Beautiful Bill Act. That Section imposes an annual excise tax on the net investment income of an “applicable educational institution,” as defined in Section 4968(b) and, as described in Section 4968(d), a portion of certain net investment income of certain related organizations, for the taxable year. The changes enacted under OBBBA included the replacement of a flat 1.4% excise tax rate with a graduated tax rate, a modification to the test for determining whether an institution is subject to the tax, and an expansion of the type of income included in gross investment income subject to the tax, among others. These changes are effective for taxable years beginning after December 31, 2025.

• Report Number 1530 (Report on Selected Issues Under Section 108(e)(6)):

[This Report] address[es] selected interpretive issues under Section 108(e)(6) of the Internal Revenue Code . . . . The Report identifies several areas of uncertainty under current law and provides recommendations for guidance to clarify the application of Section 108(e)(6) in certain commonly encountered transaction patterns. Section 108(e)(6) governs the treatment of debt contributed to a corporation as a shareholder contribution to capital and determines the extent to which cancellation of indebtedness income is recognized based on the shareholder’s adjusted basis in the debt. Despite its longstanding inclusion in the Code, the absence of comprehensive Treasury regulations and the limited scope of other guidance have resulted in significant interpretive uncertainty for the government and taxpayers alike. The Report focuses on domestic (i.e., non-cross-border) issues involving C corporation transferees outside of the consolidated return or affiliated group context and alternative minimum tax regime. In particular, the Report addresses (i) the determination of whether a debt contribution is made in a shareholder capacity rather than a creditor capacity, including a proposal for guidance to adopt a “dominant motivation” test; and (ii) the interaction of Section 108(e)(6) with Section 108(e)(8) or 108(e)(10) in transactions involving partial contributions of debt, where the remainder of the debt is retained or exchanged for stock or new debt. The Report also assesses related issues such as the role of form versus substance in the context of debt contributions.