Treasury Dept. Outlines Regulatory Rollbacks

Chris Gaetano
Published Date:
Oct 4, 2017
Change Ahead Road Sign

The U.S. Treasury Department released a report detailing regulatory rollbacks and revisions aimed at reducing what it says are the burdens of tax regulation. The report said that it is withdrawing proposed regulations under Section 2704 that would have limited valuation discounts, which the Treasury Department said hurts family-owned and operated businesses due to making it tougher to transfer their business to their children. It also plans to withdraw proposed Section 103 regulations on the definition of a political subdivision as it pertains to tax-exempt municipal bonds, which would have put in enhanced standards demonstrating governmental purpose and control. The Treasury said it would be costly and burdensome to comply with the standards. It will also revoke Section 385 documentation regulations as they currently stand and replace them with something it believes would be more streamlined. The proposed regulations have to do with documentation of reasonable expectation of ability to pay indebtedness and treatment of ordinary trade payables. 

While it does plan to retain recent regulations discouraging the use of corporate inversions for tax purposes, the Treasury Department said it will hold off on implementing them until tax reform has passed. 

Beyond revoking proposed regulations, it also plans to consider partial revokation of final regulations under Section 7602 on the Participation of a Person Described in Section 6103(n) in a Summons Interview. The regulation would prohibit attorneys who are private contractors to assist the IRS in auditing taxpayers; the Treasury wants to amend this to allow outside subject-matter experts to participate in summons proceedings. The Treasury also wants to substantially revise regulations under Section 752 on Liabilities Recognized as Recourse Partnership Liabilities. The Treasury said the regulations, which have to do with disguised sales, are temporary and should be revoked. 

Finally, it will look into substantially revising temporary regulations under Section337(d) on Certain Transfers of Property to Regulated Investment Companies and Real Estate Investment Trusts. Treasury and the IRS plan to propose to replace the temporary regulations with revised regulations designed to narrow their application. In addition, it wants to revise final Regulations under Section 367 on the Treatment of Certain Transfers of Property to Foreign Corporations, which eliminates the ability to transfer property to foreign corporations without immediate or future U.S. tax. While it plans to implement these measures in the meanwhile, Treasury said that it will develop exceptions. It also plans to revise final regulations under Section 987 on Income and Currency Gain or Loss With Respect to a Section 987 Qualified Business Unit, which pertain to foreign currency transactions. Treasury plans to immediately announce relief allowing taxpayers to postpone the application of these rules. Treasury plans to propose changes to further simplify the regulation, and also plans to consider more fundamental changes that might be implemented to address taxpayer concerns.  

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