Republicans and businesses are happy that the Trump Treasury Department is taking a second look at the rules the Obama administration rushed out the door to try to stop companies from fleeing the country.
Rep. Kevin Brady, the Republican chairman of the House Ways and Means Committee, applauded the executive order President Trump signed Friday ordering a review of 2016’s tax regulations, and said specifically that he hoped it would result in overturning the Obama anti-inversion rules.
“I appreciate the Trump administration’s thorough review of all these regulations and encourage them to work to roll back the section 385 regulations and estate tax regulations that will hurt American workers and their families,” he said.
Treasury Secretary Steven Mnuchin had insisted earlier in the day that the point of the order was not to single out the anti-inversion rules finalized in October, which the Obama administration justified as necessary to protect the tax base from companies shifting profits overseas.
But all sides saw the “section 385” rules as the main focus.
Mark Weinberger, the chief executive of EY and chairman of the Business Roundtable’s tax committee, called on the Treasury to undo the anti-inversion rules, warning that they would “disrupt” the economy.
The rules were meant to stop companies from shifting profits into low-tax countries. They would prevent U.S. subsidiaries from loading up on debt to parent companies abroad. The interest payments on that debt would be tax-deductible in the U.S., effectively rerouting profits to the lower-tax jurisdiction.
While the Obama administration intended the rules to slow the pace of inversions, businesses warned that they would affect a broad range of transactions, crimping business.
At least one Democrat, however, staked out strong opposition to reversing the rules.
“With today’s executive order, President Trump continues to prioritize special interests over working families,” Maryland Sen. Chris Van Hollen said Friday afternoon. “I will fight tooth and nail against any efforts to make it easier for corporations to move their tax address overseas — and leave American taxpayers on the hook for billions of dollars in corporate tax obligations.”
