The American Institute of CPAs has sent a list of six tax regulations to Treasury Secretary Steven Mnuchin that it wants the Treasury Department to review under an executive order from President Trump calling for reducing overly burdensome tax regulations.

Trump signed an executive order last month on identifying such tax rules, focusing on any regulations issued by the Treasury Department on or after Jan. 1, 2016. The AICPA submitted a letter Tuesday highlighting half a dozen finalized and proposed regulations that it considers burdensome:

• TD 9803: Treatment of Certain Transfers of Property to Foreign Corporations – The AICPA said, “The regulations create an onerous uncertainty by requiring taxpayers to measure the use of the transferred property in the development and exploitation of other intangible property (i.e., derivative works), which may result in an increase to the useful life of the property that was transferred and any potential income inclusions under section 367(d).”

• TD 9761: Inversions and Related Transactions – The final and temporary regulations issued under Internal Revenue Code section 7874 addressing various aspects of inversions and related transactions “increase the scope of transactions impacted by the inversion statute and will likely increase the risks and resource burdens placed on taxpayers (including foreign based multinationals) engaging in cross border merger and acquisition activity,” the AICPA wrote.

• TD 9790: Treatment of Certain Interests in Corporations as Stock or Indebtedness – The AICPA contends the final and temporary regulations issued under section 385 of the tax code dealing with the potential recharacterization of certain debt instruments as equity for federal income tax purposes impose significant documentation and analysis requirements on U.S. corporations for intercompany debt issuances, the AICPA stated. The regulations also set bright line rules defining situations under which financial instruments issued as debt would be recharacterized as equity when issued in connection with certain transactions which may not have a tax avoidance motive. “The complexity of the regulations coupled with the potential for draconian outcomes in terms of tax liability dramatically increases the financial and administrative burdens placed on taxpayer resources,” the AICPA wrote.

• TD 9814: Transfers of Certain Property by U.S. Persons to Partnerships with Related Foreign Partners – The final and temporary regulations deal with transfers of appreciated property by U.S. persons to partnerships with foreign partners related to the transferor. The AICPA said the regulations would impose unnecessary complexity and additional burdens on taxpayers in an effort to prevent a limited targeted abuse that the IRS could address under its existing anti-abuse regulations.

• REG-163113-02: Estate, Gift, and Generation-Skipping Transfer Taxes; Restrictions on Liquidation of an Interest – The proposed regulations deal with restrictions on liquidation of an interest and the valuation of interests in corporations and partnerships for estate, gift, and generation-skipping transfer tax purposes. The AICPA said it believes the regulations are overly broad and expand the breadth of section 2704 in a manner not contemplated by Congress. Last December, the AICPA asked the Treasury and the Internal Revenue Service to withdraw them.

• REG-127923-15: Consistent Basis Reporting Between Estate and Person Acquiring Property From Decedent – The proposed regulations cover a new) requirement for consistency between a recipient’s basis in property acquired from a decedent and the value of the property as reported for estate tax purposes as well as cover the associated reporting requirements under a new section 6035. The AICPA said it believes the estate tax basis reporting proposed regulations overreach the statutory legislative authority regarding the zero basis rule and supplemental filings.


AICPA building in Durham, N.C.
AICPA building in Durham, N.C. Photo: AICPA

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