WASHINGTON Oct 5 Two-dozen Republicans from the
U.S. House of Representatives asked the White House and the
Treasury on Wednesday not to finalize proposed regulations meant
to crack down on companies that try to reduce their U.S. taxes
by rebasing abroad, fearing it will harm business and the
In an Oct. 5 letter, Republican members of the tax-writing
House Ways and Means Committee warned administration officials
that regulations now under final review at the White House
Office of Management and Budget (OMB) need to be revised to
avoid unintended harm to the economy.
The proposed rules, known as "385" regulations because of
the section of the U.S. tax code they address, are part of the
Obama administration's effort to stop a wave of tax inversion
mergers, which occur when a U.S. company is bought by a smaller
foreign firm in a country with lower tax rates and redomiciles
there to avoid paying higher U.S. taxes.
"We urge you not to finalize the 385 regulations in haste,"
Ways and Means Chairman Kevin Brady and 23 other Republican
committee members said in Wednesday's letter. The letter was
addressed to Treasury Secretary Jack Lew and OMB Director Shaun
"We believe these rules, if finalized, would have a
significant adverse impact on the American economy, discouraging
investment and hurting American jobs and workers," the lawmakers
said. "Getting the rules right will require further engagement
with stakeholders to prevent irreparable damage."
The Treasury said in a statement that it continues to urge
Congress to address tax inversions through legislation and has
"engaged extensively" with stakeholders from the public and
private sectors on the regulations.
After unveiling the 385 regulations in April, Treasury
forwarded them to OMB for a final 90-day review last Friday and
said it was close to issuing a final version.
The 385 regulations address a business practice known as
"earnings stripping," by which a newly inverted company shifts
domestic profits overseas as tax-deductible interest payments on
debt owed to its foreign parent. The new rules would convert
some interest payments into equity dividends, which are not tax
deductible in the United States.
A separate Treasury rule to prevent serial inversion deals
by foreign companies was implemented on a temporary basis in
April but is also expected to be finalized this year. The serial
inversion rule, which is the target of a lawsuit,
as not yet been forwarded to OMB.
Some experts believe Treasury could wait until late December
to issue final regulations to avoid any potential action by
(Reporting by David Morgan)