Ways and Means Democrats press Treasury on debt/equity regulations

Tax Hot Topics | Ways and Means Democrats press Treasury on debt/equity regulationsDemocratic members of the House Ways and Means Committee have submitted a letter to Treasury Secretary Jacob Lew, asking that Treasury consider whether exceptions or special rules, including transition rules, are appropriate for the recently issued proposed regulations under Section 385 (REG-108060-15).

Those regulations, which were released in early April along with final regulations under Sections 7874 and 367, are intended to inhibit tax inversions. Business leaders, however, have expressed concern that the proposed regulations would hinder a large business from pooling available cash across business units and create uncertainty in how debt and equity have been classified by the business, among other things. Some business groups have sought to extend the comment period for the regulations, change the effective date of the regulations and force the government to provide an economic analysis prior to finalization.

Republicans on Capitol Hill have supported the business community’s efforts but generally haven’t been willing to make the proposed regulations a major issue, because they don’t want to be seen as impeding anti-inversion efforts in an election year. The letter from their Democratic counterparts provides some cover for Congress, which recognizes the breadth of the new proposed regulations.

Senate Finance Committee Chair Orrin Hatch, R-Utah, said a hearing on the regulations would likely be held in the future. Hatch, who is working on a corporate integration plan that is expected to be released during the next several weeks, has said his plan would eliminate the need for the regulations.

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