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Contractors Want Longer Comment Period on Debt-Equity Regs

JUN. 28, 2016

Contractors Want Longer Comment Period on Debt-Equity Regs

DATED JUN. 28, 2016
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June 28, 2016

 

 

The Honorable Jacob Lew

 

United States Treasury Secretary

 

U.S. Department of the Treasury

 

1500 Pennsylvania Ave., N.W.

 

Washington, D.C. 20220

 

ATTENTION: Comments on Section 385 Proposed Regulations

 

Dear Secretary Lew:

The Association of General Contractors of America (AGC) respectfully submit the following comments for your consideration regarding the Notice of Proposed Rulemaking [REG-108060-15] dated April 4, 2016, in which the Department of Treasury ("Treasury") and Internal Revenue Service ("IRS") issued proposed regulations impacting debt-equity regulations under Internal Revenue Code section 385 (the "proposed 385 regulations"). The proposed 385 regulations, which countermand long-standing principles, tax case law and regulations will significantly increase the cost of doing business in the United States, and create further obstacles to much needed investment, job creation and economic growth.

AGC is the leading association in the construction industry, and its nearly 26,000 members are engaged in all forms of nonresidential construction, roughly 6.6 million American workers are employed in the industry, and AGC members consist primarily of small businesses with the vast majority (nearly 80 percent) organized as pass-through entities. With regard to the Administration's intended goal that the proposed 385 regulations are designed to limit the ability for multinational corporations to employ tactics to avoid high domestic taxation, a direct and significant result is the immediate (and retroactive) halt to small U.S.-based business contractors' financial planning and operations; of which, these firms will never be involved in a corporate inversion; let alone involved in economic activity outside the state they maintain operations. While the construction industry continues to build its way out of the Great Recession, the uncertainty and adverse consequences stemming from the proposed 385 regulations would undoubtedly lead to the closure of numerous general contractors around the country.

AGC has collected feedback from impacted members; although, the significant changes proposed in the absence of any prior notice requires additional time to analyze and review the implications on all AGC members including those with S-corporation status. Given the extent of these proposed changes, small and large construction companies remain in the initial stages of assessing how the multiple rules in the proposed 385 regulations will impact their business operations and tax positions. I believe the proposed 385 regulations would have broad negative ramifications on the domestic construction industry if finalized in their current form, and at a minimum AGC recommends that Treasury and IRS:

  • Extend the public comment period from July 7, 2016, to October 5, 2016; and

  • Dedicate adequate time and resources for a comprehensive review and analysis of the public comments on the proposal rather than finalize the regulations on an arbitrary timeline.

 

I appreciate your attention to these comments, and AGC welcomes the opportunity to meet with you and your advisors at Treasury and IRS. If, after reviewing this letter, you have any questions or require additional information, please do not hesitate to contact Brian Lenihan, AGC's Director of Tax at 202-547-4733.
Sincerely,

 

 

Jeffrey D. Shoaf

 

Senior Executive Director,

 

Government Affairs

 

The Associated General Contractors

 

of America

 

Arlington, VA

 

CC:

The Honorable Mark J. Mazur, Assistant Secretary for Tax Policy, US Department of Treasury PA: LPD:PR (REG-108060-15), Rm. 5203, IRS, Washington DC 20044 via regulations.gov

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