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Leading Business Groups Express Concern Over Economic Impact of Treasury’s Proposed Section 385 Regulations
Date: 5/12/2016
Written By: Jennifer Cummings, The Fratelli Group for NFTC, (202) 822-9491

Washington DC– TheNational Foreign Trade Council(NFTC) joined more than 20 other leading business associations today in sending a letter to U.S. Secretary of the Treasury, expressing concerns about the agency's proposed debt-equity regulations under Internal Revenue Code Section 385 (the "proposed 385 regulations"). In the letter to Secretary Lew, the associations cautioned that the proposed regulations would negatively impact U.S. businesses, jobs and the economy.

The groups wrote:

"The proposed guidance, which overturns long-standing tax principles and well-established case law and regulations, will significantly increase the cost of doing business in the United States, and create further obstacles to much needed investment, job creation and economic growth. Because of the significant and disruptive impact of the proposed 385 regulations on critical business operations of a wide swath of employers in the United States, we respectfully request that, at a minimum, Treasury:
 
  • "Change the effective date for the proposed debt-equity recharacterization rule from applying to debt instruments that are issued on or after April 4, 2016, and instead apply the rule to debt instruments that are issued on or after the date that is 90 days after the proposed regulations are finalized;
  • "Extend the public comment period fromJuly 7, 2016, toOctober 5, 2016, at the earliest; and
  • "Dedicate adequate time and resources for a thorough review and analysis of the public comments on the proposal."
In addition,NFTC Vice President for Tax Policy Cathy Schultz said, "The proposed regulations will affect the financing structure of almost every NFTC member company. Without a delay in the comment period, we are concerned that companies have little time to determine how the proposed regulations will affect them and then develop comprehensive comments that will reflect their concern about these proposed regulations."

Schultz continued, "We also believe that theApril 4effective date should be delayed so that it does not negatively affect company investment before the regulations are finalized. Eliminating the retroactive effective date and extending the comment period would ensure that the comments that Treasury and IRS receive reflect company concerns, and will give the IRS and Treasury information on the economic impact that the proposed regulations will have on job growth and investment in the United States."

For the full text of the letter, click here.

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About the NFTC
Serving America's Global Businesses Since 1914 - The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules- based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York.
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