Congressional lawmakers are far from reaching a consensus on whether Treasury should delay finalizing its proposed debt-equity regulations this fall.
The top Republican taxwriter in the House is calling for the immediate elimination of the proposed section 385 regs (REG-108060-15 
), while Democrats are considering drafting a letter to the administration suggesting improvements. The regs, released in April, address whether an interest in a related corporation is treated as stock or indebtedness for federal tax purposes.
Democratic tax staffers from the House Ways and Means and the Senate Finance committees met separately with senior Treasury officials in late May and early June to discuss the regulations and their impact on businesses, including cash pooling, lawmakers and their aides confirmed to Tax Analysts. The meetings did not result in Treasury agreeing to delay the coming release of the final regulations, they indicated.
In April an IRS official said the agency was making an effort to meet the Labor Day deadline IRS Commissioner John Koskinen recommended for regulations, but on June 2 Treasury Assistant Secretary for Tax Policy Mark Mazur said, "We're going to give adequate consideration to all of [the] comments that come in, and then we'll see how fast we can move. We'd like to be able to finalize these this year. I don't think we have an artificial deadline . . . but we want to get these done as quickly as we can." (Prior coverage , .)
Finance Committee member Charles E. Schumer, D-N.Y, said June 15 that his staff had recently met with Treasury about the section 385 regs. Schumer said he supports stopping inversions, but he blamed Republicans for blocking that effort. Republicans "can't complain about the [section 385 regs] if they are going to paralyze everything else," he said.
Ways and Means Committee Chair Kevin Brady, R-Texas, told reporters the regulations should be delayed because their impact is too broad. "I'm convinced that if that regulation goes forward, there's going to be real economic damage in our communities," he said. "While Treasury was trying to stop inversions, they overreached in a major way, and I think America is going to lose jobs."
Brady said businesses are now uncertain about how to bring revenue and profits back to the United States to be reinvested in routine ways. "Regular traditional ways have now been thrown into uncertainty," he said. "Erecting a barrier to investment back to the U.S. is a big economic mistake."
Brady said he is assessing the committee's options, adding that lawmakers could draft a letter to Treasury, pass legislation, or use the Congressional Review Act to address the regulations. "We're not ruling out any options," he said, noting that Congress could also defund Treasury's regulatory effort through the appropriations process.
Groups like the Business Roundtable have been lobbying Congress to stop the proposed section 385 regs. During a June 15 press call, Doug Oberhelman, chair of the Business Roundtable, said the proposed rules affect any company with a foreign subsidiary that has any kind of debt-equity structure.
"We think the comment period was too short. We think not enough research was done. We think there needs to be a lot more input," Oberhelman said. "We are advocating that the comment period be extended, hopefully at least through the end of the year." The group signed on to a June 14 letter to leaders of the House and Senate tax committees seeking relief from the regulations.
But Senate Democrats would rather gather more information and make improvements to the proposed regs than delay their implementation into 2017.
"We are happy to have a discussion with House and Senate Republicans about modifications to those regs in the context of international tax reform, but we very much hope that they won't come to that discussion with the goal of rolling back the regulations and re-creating that loophole for the benefit of multinational corporations and inverters," a Senate aide said.
Senate Finance Committee Chair Orrin G. Hatch, R-Utah, and member Rob Portman, R-Ohio, have called for a hearing on the regulations, but no decision has been made yet, a Senate GOP aide said. (Prior coverage .)
Finance Committee member Sherrod Brown, D-Ohio, told reporters June 16 he has been contacted "either directly or indirectly" by numerous outside interest groups and lobbyists for multinationals opposing the regs.
"They're just trying to slow it down; that's clearly what's happening here. [Treasury Secretary Jacob] Lew wants to move, and Lew should move," Brown said. "I'm encouraging him to move on this."
He added, "If you can get Lew to slow down, then it's the next administration that takes it up, so clearly wealthy interest groups always work to delay."
Asked if Democrats were drafting a letter to Treasury about the section 385 regs, Ways and Means member Ron Kind, D-Wis., said, "Yeah, it's all very preliminary right now, and obviously this is all at a very early stage. But I think there have been some issues that have been raised that we're looking into and seeing where Treasury is right now."
Kind said his constituents are just beginning to give feedback on the regulations. "I don't know if anyone's calling for a delay of the regs right now, but [I'm] certain some of the proposals need to be looked at," he said.
House taxwriter John B. Larson, D-Conn., said there's been preliminary talk among Democrats about drafting a letter to Treasury about the regs, but that first lawmakers are meeting with taxpayers who claim that unintended consequences will harm their businesses. "We said [to taxpayers], 'clarify for us how you're being unfairly impacted so wecan try to rectify it before they release the regulation,'" Larson said.
Meanwhile, committee member Mike Thompson, D-Calif., said he has been working on a letter to Treasury with Rep. Charles W. Boustany Jr., R-La., addressing concerns with the regulation. Thompson said he wanted Boustany and Rep. Richard E. Neal, D-Mass., to take the lead on writing it.