Treasury considering rolling back Obama-era offshore tax rule: report
The Trump administration is considering rolling back an Obama-era tax rule aimed at cracking down on offshore tax deals, Bloomberg reported Tuesday, citing people familiar with the discussions.
The news outlet reported that Treasury Department officials are weighing narrowing the regulations or repealing them and replacing them with new rules that would be more business-friendly. Bloomberg also reported that IRS Chief Counsel Michael Desmond has said that Treasury and the IRS are looking at addressing the rules in some way this fall.
In 2016, then-President Obama’s Treasury Department issued rules that were aimed at preventing U.S. companies from moving their headquarters overseas for tax purposes after merging with foreign companies — transactions known as corporate inversions.
The rule Treasury is reportedly considering changing was designed to go after a tax-avoidance strategy companies often used after inverting known as “earnings stripping.” Under this strategy, companies would move U.S. earnings to lower-tax countries through the use of debt.
Business groups have long had issues with the rule, expressing concerns that it impacts transactions that have nothing to do with inversions. And Bloomberg reported that some critics of the rule have argued that it’s no longer necessary in light of President Trump’s 2017 tax law.
But supporters of the rule argue that it has been successful in helping to reduce the use of certain corporate tax-avoidance strategies.
“One of the Trump administration’s top priorities has been making it as easy as possible for the wealthiest Americans and corporations to cheat and avoid taxes,” said Sen. Ron Wyden (D-Ore.), the ranking member on the Senate Finance Committee, in a statement Tuesday. “Rules preventing the offshoring of corporate profits should be strengthened—not weakened.”
Updated at 5:42 p.m.