Treasury IDs Obama-era tax rules to reform

The Treasury Department on Friday identified eight tax regulations that it plans to suggest changes to, following a review that was directed by President Trump.

Among the rules the Treasury plans to propose reforms to are regulations the Obama administration issued relating to offshore tax deals and the estate tax, which have been opposed by GOP lawmakers and business groups.

Trump in April issued an executive order that directed the Treasury to review significant tax rules issued on or after Jan. 1, 2016.

{mosads}The order directed the Treasury to issue a report that identifies regulations that impose an “undue financial burden” on taxpayers, add “undue complexity” to tax laws or increase or exceed the IRS’s statutory authority. The Treasury’s review found eight tax regulations that meet one of the first two of these criteria.

“Consistent with the order, [the] Treasury intends to propose reforms — potentially ranging from streamlining problematic rule provisions to full repeal — to mitigate the burdens of these regulations in a final report submitted to the President,” the IRS wrote in a notice released Friday.

One of the regulations the Treasury identified is a rule the Obama administration proposed to help stop corporate inversions — transactions in which a U.S. company merges with a foreign business and reincorporates overseas to lower its taxes.

The rules, which were finalized in October, would recharacterize certain related-party debt as equity. Many business groups dislike the rules, arguing that they involve burdensome documentation requirements and would ensnare transactions done in the ordinary course of business that have nothing to do with inversions.

Another rule on the Treasury’s list is proposed regulations relating to the estate tax. The proposal, which the Obama administration issued in August, would restrict discounts on the value of minority shares of family-owned businesses for estate-tax purposes.

The Obama administration had argued the rules would help to reduce tax avoidance by wealthy Americans. But many business groups sought for the proposed rules to be withdrawn, arguing they would make it more difficult for families to pass on their businesses to the next generation.

Other rules that the Treasury identified involved the definition of a political subdivision that can issue tax-exempt bonds, transfers of property to regulated investment companies and real-estate investment trusts, and the treatment of certain property transfers to foreign corporations.

The Treasury is seeking public comment on whether the rules it identified should be withdrawn or altered. Comments are due by Aug. 7. Under Trump’s executive order, the Treasury is supposed to submit a report to the president by Sept. 18 that recommends specific actions to ease burdens that the identified regulations pose.