by Julie Martin
US Democrats on the House Ways and Means Committee today urged their colleagues to oppose an effort to repeal the final Section 385 debt/equity regulations.
Last week, Rep. Todd Rokita (R-Ind.) introduced a joint resolution (H.J. Res. 54) under the Congressional Review Act to disapprove the documentation requirements in the section 385 regulations, finalized last October.
“This regulation, as finalized, actually makes it more difficult for companies to bring funds back to the United States. A multi-national company looking to expand its American operations would face large tax burdens if it tried to use its money earned outside of the United States to fund the expansion,” Rokita explained on his website.
In a letter released today, though, all Democrat Ways and Means members joined in asserting that any repeal of the regulations must be opposed. The final regulations are needed to curtail the ability of inverted companies to engage in the tax avoidance practice of earnings stripping, the members said.
“By moving to repeal Treasury’s anti-earnings stripping rules, Republicans in Congress will open the door to more companies renouncing their US citizenship for tax purposes, while still reaping the benefits of doing business in America — a tax practice President Trump railed against on the campaign trail,” the members said.
According to the letter, if H.J. Res. 54s is passed, Treasury would be blocked from crafting any further regulations to address earnings stripping by multinationals.
There is no indication yet on when the joint resolution might be considered by the House.
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
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