Letter on proposed Treasury regulations under section 385

Friday, May 6, 2016 - 11:30am

May 6, 2016

CC: PA:LPD:PR (REG-108060-15)
Room 5203
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

Re: Proposed Treasury regulations under section 385

Dear Sir or Madam:

The U.S. Chamber of Commerce, the world's largest business federation representing the
interests of more than three million businesses of all sizes, sectors, and regions, as well as state
and local chambers and industry associations, and dedicated to promoting, protecting, and
defending America's free enterprise system, requests a 90-day extension of the deadline for filing
comments on REG-108060-15 (proposed Treasury regulations under section 385) as published in
the Federal Register on April 8, 2016. While the Chamber has begun to receive meaningful
feedback from our impacted members, the significant changes proposed in the absence of any
prior notice require additional time to analyze and review.

While prior notices suggested Treasury was considering “guidance to address strategies
that avoid U.S. tax on U.S. operations by shifting or ‘stripping’ U.S.-source earnings to lower-tax
jurisdictions, including through intercompany debt” in the context of inversion transactions, in
no way did such statement sufficiently notice the scope of what was actually promulgated under
section 385. In this regard, taking into account the language of section 385 and the regulations
previously proposed and withdrawn, the part-equity/part-debt and documentation rules were not
only completely unexpected but arguably could be some of the most significant changes to the
U.S. tax rules in recent history. As a result of these proposed sweeping changes, stakeholders
were surprised and need additional time to understand and put forth reasonable and constructive
comments. Further, since Treasury has indicated they intend to finalize these regulations rapidly,
an extended comment period so that the business community can provide feedback and Treasury
can engage with the business community on finding solutions is essential.

Further, the breadth, scope, and consequences of these regulations for U.S. Chamber of
Commerce members are vastly greater than ever suggested in prior guidance. Rather than
address the limited base erosion concerns in the context of inversions suggested in the earlier
notices, these regulations impact the use of intercompany debt among all multinational groups,
both domestic and foreign, except where those instruments are issued between U.S. consolidated

group members. Even certain entirely domestic companies that for various reasons cannot or
choose not to file consolidated returns and that utilize intercompany debt are swept into these

The Chamber believes it is critical, therefore, that these proposed regulations be
considered through a deliberate and thorough process taking into account the views and
comments of all interested stakeholders. Therefore, we respectfully request that the Internal
Revenue Service extend the deadline for receiving comments on the proposal for 90 days until
October 5, 2016.


R. Bruce Josten

Cc: The Honorable Jack Lew
Department of the Treasury