Treasury dropping regs CPAs say are burdensome

Written on Oct 12, 2017

OSCPA staff report

The U.S. Department of the Treasury announced Oct. 4 that it will withdraw, partially withdraw or revise several tax regulations identified as “burdensome” under President Trump’s Executive Order 13789, issued April 21.

That includes five regulations OSCPA’s Federal Tax Committee commented on in August, pretty much urging the action regulators just took.

Among the red tape cut were Section 2704 regulations that would limit valuation discounts for estate, gift and generation-skipping transfer tax purposes. The Treasury said the regulations “would have hurt family-owned businesses by limiting valuation discounts” and “made it difficult and costly for a family to transfer their business to the next generation.”

In addition, Section 103 is scheduled for full revocation. The section defines a political subdivision for tax-exempt bond purposes. According to the release, the added requirements “would have been costly and burdensome.”

Section 385’s documentation requirements also are up for withdrawal, and would be replaced with streamlined rules. The Treasury is expected to keep the rest of the Section 385 rules while Congress works on tax reform.

Sections 7602 and 752 are being considered for partial withdrawal, and Sections 337(d), 367 and 987 could still be substantially revised.

OSCPA’s Federal Tax Committee urged the Treasury to consider the elimination of Sections 7602, 2704, and 367 and believed Section 752 to be too complex to be implemented, enforced or monitored. It also requested a longer delay in the effective date of the documentation rules for Section 385. The committee did not specifically comment on Section 103, 337(d) or 987.

In July, the Treasury announced it would review these eight regulations and believed they either should be rescinded or modified. Officials there said the Treasury continues to work with Congress on tax reform, and is “hopeful that these efforts will address base erosion and earnings stripping while removing tax incentives for foreign takeovers of U.S. companies or for U.S. companies to invert.”

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