Comment Letter on Identifying and Reducing Tax Regulatory Burdens | Business Roundtable

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The Honorable Steven T. Mnuchin
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC  20220
 
Dear Mr. Secretary:
 

On behalf of Business Roundtable, I am writing in response to Notice 2017-38, “Implementation of Executive Order 13789 (Identifying and Reducing Tax Regulatory Burdens),” published by the Department of the Treasury (Treasury) and the Internal Revenue Service (the IRS or the Service) in the Internal Revenue Bulletin on July 24, 2017 (the Notice).[1] Business Roundtable, an association of chief executive officers who lead companies that operate in every sector of the U.S. economy, has serious concerns about the implementation cost, business disruption, and consequent harmful impacts on the economy that would result from a number of the tax regulations identified in the Notice.

Business Roundtable strongly supports the President’s policy objectives described in EO 13789, which include that the “Federal tax system should be simple, fair, efficient, and pro-growth” and “[t]he purposes of tax regulations should be to bring clarity to the already complex Internal Revenue Code . . . and to provide useful guidance to taxpayers.”[2] EO 13789 directed Treasury to undertake immediately a review of “all significant tax regulations issued by the Department of the Treasury on or after January 1, 2016,” and instructed Treasury to identify all significant “regulations that: (i) impose an undue financial burden on United States taxpayers; (ii) add undue complexity to the Federal tax laws; or (iii) exceed the statutory authority of the Internal Revenue Service.”[3]

According to the Notice, Treasury determined that 52 regulations were “potentially significant” and subject to review under EO 13789.[1] Following its review of the regulations, Treasury identified eight regulations that “impose an undue financial burden on U.S. taxpayers” and/or “add undue complexity to the Federal tax laws,” with respect to which Treasury intends to propose reforms ranging from streamlining problematic provisions to fully repealing the regulations in order to mitigate the burdens of such regulations.[2] These regulations include three of particular concern to Business Roundtable:

  • Final and Temporary Regulations under Section 385;[1
  • Final and Temporary Regulations under Section 987;[2] and
  • Final Regulations under Section 367.[3]

Business Roundtable agrees with Treasury that these regulations are significant in view of the Presidential priorities for tax regulations outlined in EO 13789, as each imposes an undue financial burden on U.S. taxpayers and/or adds undue complexity to the Federal tax laws. In addition, although not identified by Treasury in Notice 2017-38, Business Roundtable supports the review and modification of the temporary and proposed regulations under section 901(m),[1] which impose an undue financial burden on U.S. taxpayers, add undue complexity to the Federal tax laws, and in some ways exceed the original legislative intent.

As discussed in the attached technical comments, these regulations “effectively increase tax burdens, impede economic growth, and saddle American businesses with onerous fines, complicated forms, and frustration.”[2] The four regulations discussed herein will harm the U.S. economy by disrupting business activities, increasing uncertainty, creating disincentives for foreign direct investment, and hindering economic growth and job creation. Business Roundtable supports the withdrawal or substantial modification of these regulations to reduce complexity, compliance and financial burdens imposed on U.S. taxpayers, and adverse impacts on the U.S. economy. In addition, certain portions of the regulations exceed Treasury’s rulemaking authority and, for that reason alone, should be withdrawn or replaced with more tailored rules that comport with Treasury’s scope of authority.

While the withdrawal or substantial modification of these regulations would align with the Administration’s goal of reducing regulatory burdens, Business Roundtable believes comprehensive tax reform is the ultimate solution for fixing an outdated tax system that hamstrings the U.S. economy and job creation. Without tax reform, U.S. companies and American workers will lose in global competition and the U.S. economy will lose new investment, leading to more slowly growing wages and living standards for American workers and their families. The significant tax regulations identified in the Notice, which add to the cost of being a U.S.-headquartered company and of U.S. business investment, exacerbate the anticompetitive nature of the U.S. tax system.

Tax reform that provides a competitive statutory rate and a modern international tax system would allow U.S. companies and American workers to compete on a level playing field with the rest of the world. A more competitive tax system would lead to increased investment in the United States and faster economic growth, resulting in increased job creation and higher wages for American workers. The significant tax regulations identified in the Notice, and in particular, the four regulations identified by Business Roundtable, send us down the wrong path.

Business Roundtable applauds the Administration’s leadership on regulatory reform and the desire of the Treasury Department to reduce tax regulatory burdens. On behalf of Business Roundtable, I thank you for your consideration of these regulations and would be pleased to provide any information that might further assist you.

Sincerely,

Mark A. Weinberger
Global Chairman & CEO
EY
Chair, Tax and Fiscal Policy Committee
Business Roundtable

Attachment (1)



[1]        T.D. 9800, 81 Fed. Reg. 88103 (Dec. 7, 2016); REG-129128-14 (Dec. 7, 2016).

[2]        EO 13789.

 

[1]        T.D. 9790, 81 Fed. Reg. 72858 (Oct. 21, 2016), corrected by 82 Fed. Reg. 8165 (Jan. 24, 2017).

[2]        T.D. 9794, 81 Fed. Reg. 88806 (Dec. 8, 2016); T.D. 9795, 81 Fed. Reg. 88854 (Dec. 8, 2016).

[3]        T.D. 9803, 81 Fed. Reg. 91022 (Dec. 16, 2016).



[1]        The Notice provides the following link for a list of the regulations that Treasury reviewed: https://www.treasury.gov/resource-center/tax-policy/Pages/Executive-Orde....

[2]        After examining those regulations, Treasury concluded that the following eight regulations “impose an undue financial burden on U.S. taxpayers” and/or “add undue complexity to the Federal tax laws”:

(1) Proposed Regulations under Section 103 on Definition of Political Subdivision (REG-129067-15; 81 F.R. 8870); (2) Temporary Regulations under Section 337(d) on Certain Transfers of Property to Regulated Investment Companies (RICs) and Real Estate Investment Trusts (REITs) (T.D. 9770; 81 F.R. 36793); (3) Final Regulations under Section 7602 on the Participation of a Person Described in Section 6103(n) in a Summons Interview (T.D. 9778; 81 F.R. 45409); (4) Proposed Regulations under Section 2704 on Restrictions on Liquidation of an Interest for Estate, Gift and Generation-Skipping Transfer Taxes (REG-163113-02; 81 F.R. 51413); (5) Temporary Regulations under Section 752 on Liabilities Recognized as Recourse Partnership Liabilities (T.D. 9788; 81 F.R. 69282); (6) Final and Temporary Regulations under Section 385 on the Treatment of Certain Interests in Corporations as Stock or Indebtedness (T.D. 9790; 81 F.R. 72858); (7) Final Regulations under Section 987 on Income and Currency Gain or Loss With Respect to a Section 987 Qualified Business Unit (T.D. 9794; 81 F.R. 88806); and (8) Final Regulations under Section 367 on the Treatment of Certain Transfers of Property to Foreign Corporations (T.D. 9803; 81 F.R. 91012).



[1]        See Notice 2017-38, 2017-30 I.R.B. 147 (Jul. 24, 2017). The Notice was first released on July 7, 2017, and later published in the Internal Revenue Bulletin on July 24, 2017.

[2]        Presidential Executive Order 13789 on Identifying and Reducing Tax Regulatory Burdens (“EO 13789”), 82 Fed. Reg. 19317 (Apr. 21, 2017).

[3]        Id