{"id":45915,"date":"2017-10-05T07:22:26","date_gmt":"2017-10-05T07:22:26","guid":{"rendered":"https:\/\/www.biphoo.com\/bipnews\/?p=45915"},"modified":"2017-10-05T07:22:26","modified_gmt":"2017-10-05T07:22:26","slug":"trump-to-keep-obama-rule-curbing-corporate-tax-inversion-deals","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/business\/trump-to-keep-obama-rule-curbing-corporate-tax-inversion-deals.html","title":{"rendered":"Trump to keep Obama rule curbing corporate tax inversion deals"},"content":{"rendered":"

Trump to keep Obama rule curbing corporate tax inversion deals<\/span><\/strong><\/span><\/h2>\n

Trump to keep Obama rule curbing corporate tax inversion deals:- The Trump administration will keep for now an Obama-era rule that helped halt a wave of U.S. corporations moving abroad via tax-driven corporate inversion deals, it said on Wednesday, but added that it expected tax reform to obviate the rule.<\/span><\/p>\n

President Donald Trump ordered a review almost six months ago of tax rules from the final months of the Obama administration, including ones to discourage companies from redomiciling abroad for tax reasons.<\/span><\/p>\n

\u201cTreasury plans to retain the distribution requirements under Section 385 pending enactment of tax reform,\u201d the department said in a statement, adding \u201cthese regulations are necessary to safeguard against earnings stripping.\u201d<\/span><\/p>\n

It also said it planned to revoke and streamline some related documentation rules.<\/span><\/p>\n

A 2011-2015 wave of inversion deals prompted Treasury to take a series of actions that culminated in an April 2016 rule release and the collapse of a $160-billion deal between U.S. drugmaker Pfizer Inc (PFE.N) and Ireland\u2019s Allergan Plc (AGN.N), which would have been the largest inversion ever.<\/span><\/p>\n

Tax inversions occur when a U.S. company is acquired by a smaller foreign business from a low-tax country and adopts its domicile to reduce the combined firm\u2019s overall U.S. tax burden.<\/span><\/p>\n

The Section 385 rule was part of Obama\u2019s anti-inversion effort and was finalized a year ago. It was meant to combat a corporate tax-reduction technique known as earnings stripping.<\/span><\/p>\n

Earnings stripping occurs when the U.S. subsidiary of a newly inverted company loads up on debt and avoids taxes on its domestic profits by sending them overseas to the foreign parent in the form of tax-deductible interest payments.<\/span><\/p>\n

The Obama rule reclassified some forms of debt as equity, changing tax-exempt interest payments into taxable dividends and making earnings stripping strategies more difficult to pursue.<\/span><\/p>\n

The Organization for International Investment (OFII), a Washington lobbying group for foreign-based companies with U.S. operations, praised the documentation portion of Treasury\u2019s latest move and criticized the retention of the rest of the Section 385 rule.<\/span><\/p>\n

\u201cUnfortunately, in perpetuating an unsubstantiated premise of the Obama administration, Treasury has decided to keep part of these discriminatory regulations,\u201d the group said.<\/span><\/p>\n

Companies that have inverted, OFII said in a statement, \u201care not overleveraged, their debt levels have remained largely flat and their interest expense has declined while their investments into America\u2019s economy have grown.\u201d<\/span><\/p>\n

The Treasury Department said it expected a Republican proposal to overhaul the tax code would eliminate the need for anti-inversion rules. The proposal would sharply cut the corporate tax rate and end taxation of multinationals\u2019 foreign profits.<\/span><\/p>\n

Source:-\u00a0http:\/\/www.reuters.com\/article\/us-usa-tax-inversions\/trump-to-keep-obama-rule-curbing-corporate-tax-inversion-deals-idUSKBN1C92RQ<\/span><\/p>\n

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