Top tax-writing Republicans in the House slammed proposed Department of Treasury regulations aimed at curbing corporate inversions Tuesday, saying the change would hinder investment and economic growth in the United States.
In a letter – spearheaded by House Ways and Means Committee Chairman Kevin Brady and Tax Policy and Subcommittee Chairman Charles Boustany and signed by every GOP member on the panel – addressed to Treasury Secretary Jack Lew, the lawmakers alleged the agency’s broad changes to the section of the tax code would increase uncertainty for American businesses, even in their “non-tax motivated business activity.”
Treasury’s proposed rule, unveiled in April, would “prevent a foreign company (including a recent inverter) that acquires multiple American companies in stock-based transactions from using the resulting increase in size to avoid the current inversion thresholds for a subsequent U.S. acquisition.” It would also make it more difficult for corporations to lighten tax burdens through internal loans through deductible interest payments.
Republicans called for an economic analysis to be conducted so they could see the full weight of the impact the changes would make in addition for an extension to the public comment period on the rule. The GOP lawmakers also pushed for the agency to reconsider its retroactive effective date of the debt-equity re-characterization rules.
“To be clear, Congress did not intend section 385 to serve the purpose for which it is presently being used in policing inversion or earnings stripping activities, and we respectfully remind the Treasury that they have co-opted section 385 to use for purposes other than what Congress intended,” they wrote. “We stand ready to work with the Treasury, observing the appropriate channel of amending the IRC specifically through the legislative process, in any way that will improve the competitiveness of the United States as a place to conduct and locate business operations.”
The Republican tax task force unveiled a proposal last week that would lower the corporate tax rate from 35 percent to 20 percent and shift the U.S. into a territorial system, which they say will attract businesses instead of placing red tape in an attempt to stop them form fleeing.
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