The Honorable Jacob Lew
United States Treasury Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
RE: Proposed Treasury-IRS Rulemaking to Section 385 (REG-1108060-15)
Dear Secretary Lew:
On behalf of the nation’s governors, NGA urges the U.S. Department of the Treasury’s Internal Revenue Service to extend the 90-day public comment period beyond the upcoming July 7 deadline in the above-captioned rulemaking. NGA’s concern stems from the risk of unintended consequences to state economies from a rush to implementation of a complex rule. Those uncertainties are heighted because the rule, as drafted, would be retroactive to April 4, 2016, rather than prospective once final.
Governors believe that a regulatory and tax environment that balances public needs without chilling economic growth and job creation is critical for federal laws and regulations that govern commerce.
NGA will not speak to the technical complexities underlying the Section 385 draft rulemaking to govern when certain related-party interests in a corporation may be treated, for federal tax purposes, in whole or in part, as stock rather than debt.
This complex draft rulemaking has the potential to affect the economic development strategies of the states negatively because its breadth would touch a wide range of industry sectors. Extending the comment period would help mitigate the risk of collateral damage. All interested parties including the states need sufficient time to scrutinize and provide detailed commentary on this multifaceted proposal intended initially, we understand, to focus narrowly on the corporate practice of inversions and earnings-stripping.
Thank you for your consideration of NGA’s request for an extension of the comment period.
Executive Director and CEO