One of the Obama Treasury’s newest proposed rules to prevent companies from moving overseas could run into legislative opposition if the administration doesn’t slow down, a top Republican lawmaker said Friday.
“If they rush, we’re putting every legislative and funding option on the table here,” said Kevin Brady, chairman of the House Ways and Means Committee, in a C-SPAN interview to be aired Sunday morning.
The Texan was among a group of bicameral lawmakers who met with Treasury officials on Capitol Hill Wednesday to convey their concerns about the agency’s latest rulemaking.
The Treasury is seeking to crack down on “earnings stripping,” a tax maneuver in which corporations have their U.S. subsidiaries issue lots of debt to related companies in low-tax jurisdictions. Because the interest payments on that debt are deductible in the U.S., the effect is to shift profits out of the country and lower tax bills.
The Treasury announced the rule, which would allow them to reclassify corporate debt as taxable equity, in the spring as part of a handful of last-ditch efforts to stop further corporate inversions, or tax maneuvers in which U.S. companies move their headquarters into low-tax countries. But it would significantly affect a much broader range of businesses, not just ones undergoing inversions.
Brady said there is bipartisan concern over the rule, for which the public comment period closed Thursday, and that legislation to stop it is a “very real possibility.”
“It depends on whether Treasury is listening,” he said. “I got the sense that they were a bit dismissive of the concerns that were raised in the meeting.”
The administration said its intention was to implement the rule “swiftly,” he said, whereas members of both parties have asked the Treasury to allow a longer comment period. Business groups have asked that the rule not kick in until at least 2019.
But if they do rush the rule, Congress would consider options to stop them, Brady said.
“The regulation they laid out is so complicated, that in that meeting … for every answer, there were five more questions that were raised,” he said.
While Democrats in both chambers have expressed concerns about the rule, liberal members of the House Ways and Means Committee weighed in supporting it this week.
And Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, sounded supportive of the Treasury’s effort in a statement released by his office Thursday evening. “We can’t sit on our hands while companies move their headquarters overseas to avoid paying taxes and expect working families to pick up the tab,” he said. “We’re committed to working with Treasury to get this right so that the regulations don’t interfere with routine business transactions.”
