WASHINGTON
(Reuters) - The U.S. government on Friday gave companies an extra year to
comply with an Obama-era regulation meant to crack down on corporations
that
try to minimize their U.S. tax bills by shifting profits abroad to countries
with lower tax rates.
The
regulation, known in corporate tax circles as the "385 rule," is
intended to combat a tax-avoidance technique called earnings-stripping, in
which multinational corporations transfer taxable income from a U.S. subsidiary
to a foreign affiliate in the guise of tax-deductible interest payments on
internal debt.
The rule,
which Treasury Secretary Steven Mnuchin is now reviewing as part of the Trump
administration's push for deregulation, seeks to eliminate the incentive for
earnings-stripping by reclassifying certain loans as equity under Section 385
of the U.S. tax code.
The change
converts tax-deductible interest payments employed by the schemes into taxable
stock dividends.
Finalized
last October, the regulation required corporations to file documentation on
their internal loans with the IRS by a January 2018 deadline. In a public
notice issued on Friday, the Treasury and Internal Revenue Service pushed the
deadline back to January 2019.
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