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Treasury Department Announces Efforts to Reduce Tax-Regulation Burden

Compliance
Article
10/13/2017
  • New U.S. Treasury Dept. report targets eight regulations for change or revocation.
  • Aim is to ease burden on taxpayers and streamline the tax system.
  • Department eyeing a total of 200-plus regulations for modification or repeal.
  • Businesses will benefit from the changes if they’re made law

Department plans to pare down or eliminate 8 tax regulations

On Oct. 4, 2017, the U.S. Treasury Department issued a report detailing eight regulations it wants to revoke entirely or in part to ease the burden on taxpayers and streamline the tax system. The department, directed by Secretary Steven T. Mnuchin, noted that it continues to work to identify more regulations for modification or repeal by evaluating “significant” rules issued recently, and starting a comprehensive review of all regulations, regardless of when they were issued.

A White House press release notes that the comprehensive review has already identified over 200 regulations that the Treasury believes should be repealed, which will begin in the fourth quarter of 2017.

The Treasury Department is highlighting provisions geared toward businesses. The changes described in the report would:

  • Remove limits on discounts for small family-owned businesses;
  • Revise the taxation rules for transferring property to foreign corporations; and
  • Simplify the regulations applied to taxation of foreign currency transactions.

Regulatory changes would benefit businesses

If these proposed regulatory revisions or revocations occur, U.S. businesses will reap the benefits. For example:

Withdrawal of proposed regulations under Section 2704 of the Code of Federal Regulations (CFR) restricting liquidation of interest for estate, gift, and generation-skipping transfer taxes

Elimination of this suggested rule, put forward by the Obama administration, “would have hurt family-owned and operated businesses by limiting valuation discounts.” The Treasury says that the regulations would have made it difficult and costly for a family to transfer its business to the next generation. However, others warn that the valuation requirements of the proposed regulations were unclear and could not be meaningfully applied.

Withdrawal of proposed Section 103 on definition of political subdivision

These proposed regulations would add new requirements to be considered a “political subdivision” for purposes of issuing tax-exempt municipal bonds. Political subdivisions are local governments created by the states to help fulfill their obligations. They include counties, cities, towns, villages, as well as special districts for schools, water use, parks, and airports. The proposed Section 103 of the CFR would require enhanced standards — and consequently more cost and effort — to show a governmental purpose and governmental control.

Revocation of final and temporary regulations under Section 385 on the treatment of certain interests in corporations as stock or indebtedness

The Treasury would replace these regulations with streamlined documentation rules, which are expected to modify the requirements related to a reasonable expectation of ability to pay indebtedness and treatment of ordinary trade payables. However, the department plans to retain Section 385’s distribution regulations pending enactment of tax reform.

Regulatory changes will ease businesses’ compliance burden

The Treasury Department’s regulatory reduction efforts will likely continue. This process, in conjunction with the upcoming tax reform proposals, are expected to simplify the tax code and promote economic growth.

Paychex will monitor this issue closely and post information pertinent to U.S. businesses.

andrew gargana headshot

Andrew Gargana is the senior federal compliance analyst within Compliance Risk Management for Paychex, Inc., based in Rochester, NY. He leads the federal payroll tax compliance activities of the company, which serves over 605,000 clients in all 50 states. The federal compliance analysts monitor all legislation and function as the liaison with the company’s Product Management and Development divisions to ensure regulatory matters affecting the firm’s payroll processing and tax filing platforms are implemented.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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