Business Groups Take Aim at Tax Rules They Want Revoked, Changed

Industry groups are calling on the IRS and Treasury Department to revoke or revise a wide swath of agency guidance that they say would hurt businesses.

Regulations in the cross-hairs include the proposed rules on the corporate alternative minimum tax, or CAMT; stock buyback excise tax proposed rules; cryptocurrency broker reporting final rules; and cloud transaction proposed rules.

In comment letters to the agencies, business groups also asked for long-awaited guidance on research and development expense amortization, which was heavily modified in the 2017 tax law.

The letters come in response to agency solicitations for input on this year’s Treasury Priority Guidance Plan and join comments from the National Foreign Trade Counciland other groups asking for withdrawals or revisions to tax rules.

CAMT

Businesses requested additional safe harbors and revisions to the proposed accounting methods for CAMT, which seeks to set a 15% minimum tax on financial-statement income for companies that make over $1 billion a year.

The American Bar Association letter requested additional safe harbors for compliance requirements on firms with no liability under the tax and with respect to the accounting for depreciable property.

The Silicon Valley Tax Directors Group, in their letter, said that while some of the proposed CAMT rules were helpful, many were overly burdensome for businesses—particularly around the treatment of partnerships and foreign tax credits. The group recommended the proposed rules be revised to expand which taxes are eligible for the foreign tax credits.

Additionally, the group said the IRS’s proposed approach to partnerships is overly burdensome.

In the proposed rules, the IRS went with a “bottom up” approach in which partnerships calculate their own adjusted income, making the adjustments to financial statement income required under CAMT, and a portion of that adjusted income would flow up to the partner or taxpayer as part of its own adjusted income.

That approach would mean more work for partnerships and came under heavy criticism after it was initially proposed. The Silicon Valley group recommended the IRS revise the proposed rules to include a “top down” approach.

Stock Buyback Tax

The Silicon Valley group urged the IRS and Treasury to remove the so-called funding rule from the proposed guidance on the excise tax on stock repurchases, under which a foreign company can be subject to the tax if its buybacks are deemed to have been funded by a US subsidiary.

The 1% tax is levied on transactions when companies buy back their own stock.

The group said that the IRS and Treasury lack the statutory authority to extend the tax with the funding rule and that it would be overly burdensome on companies. The US Chamber of Commerce also asked that the funding rule be rescinded.

R&D Expenses

Businesses also requested additional guidance on write-offs for Section 174 research and development expenditures, which were amended in the 2017 tax law to require companies to amortize the expenses over a number of years, rather than deduct them the year they were incurred.

That meant companies can take fewer R&D deductions in any one year and thus must pay higher taxes, but the government has yet to provide guidance on how that will be implemented.

The ABA said the statute modifying the rules failed to define what expenditures counted as amortizable R&D, and asked for guidance on the definition of software development, treatment of costs in contract research arrangements, and other areas. The US Chamber of Commerce also requested guidance on Section 174.

Cloud Computing

The Chamber also urged that proposed regulations on determining the source of income from cloud-computing transactions be withdrawn. The regulations “would impose a rigid, formulaic new framework” and lead to “significant administrative and compliance costs on taxpayers” the group said.

Additionally, the Chamber also joined other groups in asking that regulations on “double-dipping” of corporate losses and foreign tax credits be withdrawn.

When it comes to transfer pricing guidance, the Silicon Valley group called for the IRS to rescind final regulations on including stock-based compensation in cost-sharing agreements, and joined the NFTCs calls to revoke the so-called periodic adjustments rule.

The Center for Regulatory Freedom, which is affiliated with the American Conservative Union Foundation, urged Treasury and the IRS to rescind regulations finalized in 2024 for brokers to report cryptocurrency transactions.

The regulations charge “extortionate” penalties for failure to comply and “significantly and unjustifiably impede both technological innovation and economic development,” the group said.