The U.S. Department of the Treasury posted on October 4, 2017 that it would amend or completely do away with eight tax regulations issued under the Obama administration, including rules regarding corporate debt and transfers of estates, as part of an effort to simplify the tax code.
Treasury also announced that it continues to work to identify additional regulations for modification or repeal by evaluating significant regulations issued recently and initiating a comprehensive review of all regulations, regardless of when they were issued.
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Final Regulations under Section 7602 on the Participation of a Person Described in Section 6103(n) in a Summons Interview. Under the proposed changes to this regulation that Treasury is considering, attorneys who are private contractors would be prohibited from assisting the IRS in the auditing of taxpayers, including in the interview process. A revised regulation would continue to allow outside subject-matter experts to participate in summons proceedings.
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Regulations under Section 752 on Liabilities Recognized as Recourse Partnership Liabilities. Treasury and the IRS currently believe that the temporary regulations relating to disguised sales should be proposed for revocation and the prior regulations reinstated. Treasury and IRS will continue to study the issue and consider comments related to bottom-dollar guarantees.
The Treasury report identified the following regulations to consider for substantial revision:
- Temporary Regulations under Section 337(d) on Certain Transfers of Property to Regulated Investment Companies and Real Estate Investment Trusts. Treasury and the IRS plan to propose to replace the temporary regulations with revised regulations designed to narrow their application.
- Final Regulations under Section 367 on the Treatment of Certain Transfers of Property to Foreign Corporations. These regulations, which eliminate the ability to transfer certain property to foreign corporations without immediate or future U.S. tax, address issues that could also be addressed as Treasury continues to work with Congress on fundamental tax reform. In order to protect the U.S. tax base in the meantime, Treasury plans to continue to implement these regulations. However, Treasury and the IRS also plan to develop exceptions to the regulations.
- Final Regulations under Section 987 on Income and Currency Gain or Loss With Respect to a Section 987 Qualified Business Unit. These regulations pertain to foreign currency translations and other foreign currency transactions, and Treasury plans to propose substantial revisions. Treasury plans to immediately announce relief allowing taxpayers to postpone the application of these rules. Treasury plans to propose changes to further simplify the regulation, and also plans to consider more fundamental changes that might be implemented to address taxpayer concerns.
The planned actions include revoking regulations under section 385 of the tax code that recharacterizes certain corporate debt as equity and replacing them with streamlined documentation rules and withdrawing proposed estate transfer rules under section 2704 intended to prevent the undervaluation of transferred interests in corporations and partnerships for estate tax purposes, according to the Treasury.
The eight regulations were initially flagged as in need of reform in a report issued in July.
In addition, later this year Treasury will begin repealing later more than 200 regulations that it has identified as adding to the burden of the tax code, the department said.
“This is only the beginning of our efforts to reduce the burden of tax regulations,” Treasury Secretary Steven Mnuchin said in a statement.
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