Substantial tax reform is underway and the business community is intently awaiting details of this activity with the aim of positioning themselves to maximize opportunities and minimize any costs or risks that reform may present. How will a cut in the corporate income tax rate, the potential adoption of a “territorial” dividend exemption system or the elimination or altering of recent regulations impact companies?
On November 2, 2016, we participated in a panel discussion at TEI’s Houston Global Tax Symposium regarding the effects of the newly-finalized section 385 regulations. Of interest from a controversy perspective, we discussed the potential compliance burdens and privilege concerns raised by the new documentation requirements in the rules, and the potential problems with the non-rebuttable per se presumption in the transaction rules. We also discussed how the Internal Revenue Service has endeavored, in the regulations’ lengthy preamble, to address potential procedural challenges by responding to public comments and by providing justifications for the regulations, particularly in light of recent challenges to other regulations under the Administrative Procedure Act. It remains to be seen how the new 385 rules will affect businesses in practice, and how the IRS intends to apply them, consistent with its statutory mandate.
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