President Trump's Treasury Department announced Wednesday that it plans to undo many of former President Barack Obama's tax regulations, including a measure issued over the protests of business meant to penalize companies that move their headquarters out of the U.S. to reap tax breaks.
"This is only the beginning of our efforts to reduce the burden of tax regulations," Secretary Steven Mnuchin said Wednesday on issuing an 11-page report outlining the planned actions. "Our tax code has been broken for too long, and this retrospective review, along with our efforts on tax reform, will ensure that we have a tax system that fosters economic growth."
Trump ordered the agency in April to review tax regulations to lessen the burden of compliance. The Treasury said Wednesday it had identified more than 200 rules for repeal, starting in the fourth quarter of this year.
Of particular interest to business, one major item on the chopping block is a rule the Obama administration pushed out late last year in a last-ditch effort to prevent U.S. companies from undertaking inversions. An inversion is a tax-driven transaction in which a U.S. company merges with one in a low-tax jurisdiction and then moves the headquarters of the combined business to the tax haven, thereby cutting its taxes on international sales. Such deals have grown frequent in recent years as other countries have lowered their corporate rates.
The rule included guardrails to ensure that companies did not play accounting games with debt to shift profits out of the U.S. into tax havens. Businesses had warned that those restrictions would impose major burdens on ordinary cash-management practices.
The Trump Treasury already delayed, and will now revoke, requirements that companies document the need for debt, and replace them with "streamlined" rules.
Another major 2016 Obama rule that the Treasury will undo is a regulation limiting the ability of family-owned businesses to discount the value of a partnership given to family members. The Obama administration targeted such valuation discounts as effectively a loophole for wealthy people to avoid the estate tax. Family business groups have defended the discounts as necessary to protect children or other beneficiaries who may be minority owners who aren't able to easily sell their stakes in the company, making it less valuable.
"The regulations would have made it difficult and costly for a family to transfer their businesses to the next generation," the Treasury said.
Separately, the Trump administration is trying to repeal the estate tax as part of a tax reform effort.
"We are encouraged by this work and hope that Treasury and the IRS will continue to examine additional rules which hamper the ability of businesses to succeed and take appropriate actions," said Caroline Harris, vice president for tax policy at the U.S. Chamber of Commerce.