In a letter to the President of the European Commission (EC) on February 11, 2016, Treasury Secretary Jack Lew expressed concern that the Commission's use of a "sweeping interpretation" of the EU legal doctrine of state aid, in investigations of tax rulings granted to US companies, creates "disturbing" international tax policy precedents and should be reconsidered.

Other Treasury officials have expressed such concerns, but the elevation of the issue to the level of the Treasury Secretary is notable. The letter listed concerns similar to those expressed during December 1 hearings in both the House Ways and Means Committee and Senate Finance Committee by Robert Stack, Treasury Deputy Assistant Secretary for International Tax Affairs, namely that the EC:

— Has sought to impose penalties retroactively based on a new and expansive interpretation of state aid rules;

— Appears to be targeting US companies disproportionately;

— Has taken an approach that appears to target, in at least several of its investigations, income that Member States have no right to tax under well-established international tax standards; and

— Has taken an approach that could undermine US tax treaties with EU Member States.

The letter includes a copy of Stack's December testimony.

"The United States remains firmly committed to working with Europe and the rest of the world to prevent the continuing erosion of our corporate tax base. We believe, however, that the ongoing state aid investigations threaten to undermine the important progress we have made together in this area," the letter stated. "The Treasury Department is not alone in this view. Many Members of our Congress have strongly echoed these concerns, and have urged Treasury to take strong action."

Secretary Lew cited the letter during a hearing on the FY 2017 Budget at the House Ways and Means Committee. Chairman Kevin Brady (R-TX) commented, "I appreciate the letter that you sent, because what the EU is doing is going beyond simply addressing the income shifting, it is a money grab targeted on US companies in a variety of ways, not just to generate revenue but to make it more uncompetitive for US companies to compete around the world."

A copy of the letter is attached.

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