GOP lawmakers call for overhaul of proposed corporate tax rules

Top Republican lawmakers are pressing the Treasury Department to rewrite proposed rules meant to crack down on corporate tax avoidance.

Senate Finance Committee Chairman Orrin Hatch (Utah) and House Ways and Means Committee Chairman Kevin Brady (Texas) sent letters Monday urging Secretary Jack Lew to overhaul the rules affecting how corporations count debt and equity.

{mosads}“They would damage our economy, increase the barriers to investment for American businesses and innovators, and interfere with the growth of the good-paying jobs American workers need and deserve,” wrote Brady and several Ways and Means Republicans.  

“We cannot allow this to happen.”

A portion of the rules are meant to target “earnings stripping,” a tax avoidance strategy that counts some of a corporation’s inter-company debt as equity. 

Limiting earnings stripping is part of a broader rules package proposed in April, meant to halt U.S. companies from merging and reincorporating abroad with a foreign company. This process, called an “inversion,” helps the new company skirt U.S. corporate taxes.

Republicans have been critical of the rules, claiming their broad reach could harm American companies with no intention of moving abroad. They’ve also criticized Treasury’s pace in putting them together, with Brady and Hatch’s letters coming after a July 6 meeting with the Department.

Hatch called on Treasury to rewrite the rules in a “thoughtful, prudent, and legal manner,” and raised questions about whether Treasury’s pace follows laws on executive orders.

“The only prudent way to move forward,” wrote Hatch, “is to issue the regulations in re-proposed form. Finalizing the regulations, without another round of proposed regulations, would be imprudent.”