USCIB joined 22 other business organizations asking the government to delay the effective date of Treasury’s controversial earnings-stripping rules (proposed 385 regulations) and offer additional time for public comments. In a letter to Treasury Secretary Jacob J. Lew sent on May 12, the business groups explained that the new regulations would “significantly increase the cost of doing business in the United States” and change the way businesses can finance their operations using intercompany debt.
The new regulations are intended to prevent companies from shifting income outside of the United States through loans to subsidiaries by treating some of those loans as equity instead of debt. The business groups explained that although Treasury’s earnings-stripping rules are designed to reduce the number of corporate tax inversions, the regulations “go far beyond cross-border mergers and apply to a wide range of ordinary business transactions by global and domestic companies both in and outside the United States.” Once finalized, the new regulations could cost companies millions in lost tax deductions.
The groups requested that, given the broad impact of the new regulations on critical business operations, the government delay the effective date of the new regulations’ implementation, extend the public comment period from July to October and dedicate adequate time and resources for a thorough review of the public comments on the proposed regulations.