Aaron Fobes, Julia Lawless (202) 224-45145
Hatch Statement on Treasury’s Proposed Earnings Stripping Rule & Anti-Inversion Guidance
WASHINGTON – Today, the U.S. Treasury Department issued proposed regulations aimed at curbing earnings stripping, a common practice used by companies that redomicile, or invert, their headquarters overseas for tax purposes. The Department also issued additional anti-inversion guidance and released an updated framework for business tax reform. In response, Senate Finance Committee Chairman Orrin Hatch (R-Utah) issued the following statement:
“The administration continues to tinker along the regulatory edges with unilateral proposals to address the symptoms of inversions, but not the disease. Proposed regulations aimed at curbing earnings stripping may limit some incentives of inverting, but it will not prevent companies from restructuring for tax purposes.
“Such proposals paired with a business tax reform framework that lacks substantive details on how to achieve bipartisan reform goals put into question its effectiveness in fully addressing the problem. A better approach would be for the administration to work with Congress in good faith to address the disease causing our companies to move offshore: our outdated tax code that burdens our job creators with the highest corporate tax rate in the developed world. A comprehensive tax overhaul that reduces the rate, transitions to a territorial tax system with base erosion protections, and addresses earnings stripping will equip American businesses with the certainty they need to invest in a future here at home.
“While I will carefully scrutinize this latest proposal from the administration, if we want to make our tax system globally competitive, we need a strong partner in the White House that is more interested in creating real bipartisan results to address the disease of inversions than issuing unilateral band aids that only attempt to alleviate the symptoms.”
Today’s proposed regulations were promulgated pursuant to section 385 of the Internal Revenue Code. Since its enactment in 1969, no attempts to promulgate regulations pursuant to section 385 have been successful, despite a number of attempts.
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