House Ways and Means Committee Republicans on June 28, 2016, wrote to Treasury Secretary Jack Lew to express "grave concerns" over the potential impact of proposed debt-equity regulations under Section 385 and to request that the public comment period be extended until at least October 5, from the current July 7 deadline.

The letter said the question of whether an instrument is debt or equity has significant consequences to businesses' financial planning and operations, and that the proposed regulations represent a dramatic departure from current policy and practice. The lawmakers expressed concern about the broad applicability of the regulations to a wide array of ordinary business transactions, "creating unacceptably high levels of uncertainty and adverse collateral consequences for non-tax motivated business activity."

The letter, signed by Ways and Means Committee Chairman Kevin Brady (R-TX), Tax Policy Subcommittee Chairman Charles Boustany (R-LA), and every Republican Member of the House Ways and Means Committee, said Treasury should, at a minimum, "withdraw any provisions currently included within the proposed regulations that would significantly impact capital structuring and ordinary business transactions/operations." Members also requested that Treasury conduct a thorough economic analysis of the proposed regulations to ensure Congress has the ability to assess their effects.

On June 22, Democratic Members of Ways and Means, including Ranking Member Sander Levin (D-MI), wrote to Secretary Jack Lew asking for consideration of whether "exceptions or special rules, including transition rules," are appropriate for the proposed regulations. The Republican Members cited the Democratic letter as evidence that "the substantial concerns over these proposed regulations are shared on a bipartisan basis."

Press reports today cited a Treasury Department statement saying the comment period will not be extended: "Treasury will follow the normal 90-day comment period on the proposed earnings stripping regulations, and we will carefully consider all comments before finalizing the rules as swiftly as possible."

The letter is attached.

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ATTACHMENT

House Ways and Means Committee letter