Treasury Releases Interim Report on Reducing Tax Regulatory Burden

| 7/13/2017

The U.S. Department of the Treasury has released Notice 2017-38 with its interim report on reducing the tax regulatory burden. The report, required by executive order 13789, identifies eight federal tax regulations issued on or after Jan. 1, 2016, which impose an undue burden on U.S. taxpayers, add undue complexity to the federal tax laws, or exceed statutory authority of the IRS.

  • Final and temporary IRC Section 385 regulations, which address the classification of related-party debt as debt or equity for tax purposes
  • Proposed IRC Section 2704 regulations, which would disallow or curtail many valuation discounts used in estate planning
  • Final IRC Section 987 regulations, which provide rules for reporting income or loss of foreign branches operating in foreign currencies
  • Final IRC Section 367 regulations, which limit the types of property that qualify for the active trade or business exception and eliminate the exception for foreign goodwill
  • Temporary IRC Section 752 regulations, which provide rules for how partnership liabilities are allocated for purposes of disguised sales and for determining whether bottom-dollar payment obligations provide the necessary economic risk or loss to be taken into account as a recourse liability
  • Temporary IRC Section 337(d) regulations on transfers of property by C corporations to regulated investment companies (RICs) and real estate investment trusts (REITs), including changes enacted by the Protecting Americans From Tax Hikes Act of 2015 to prevent certain spinoff transactions involving transfers of property by C corporations to REITs from qualifying for nonrecognition treatment
  • Final IRC Section 7602 regulations regarding the participation of IRS third-party contractors in a taxpayer summons interview
  • Proposed IRC Section 103 regulations on the definition of a political subdivision of a state eligible to issue tax-exempt bonds

In its report, Treasury did not provide recommendations on how the regulations should be modified. It has requested comments by Aug. 7, 2017, on whether the regulations described in the notice should be rescinded or modified and requested comments by July 31, 2017, concerning any additional regulations that should be rescinded or modified. Under the executive order, Treasury is required to submit a report to the president by Sept. 18, 2017, with final recommendations for specific actions to mitigate the burden imposed by regulations identified in the interim report.

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