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Treasury Strategies update on IRS Rule 385

Treasury Strategies has long been a high profile advocate on behalf of our corporate and banking clients as you deal with the regulatory fallout from the financial crisis.

Once again, a proposed regulation threatens to disrupt the routine daily business practices of most medium sized and large corporations and the banks who serve them. In this case, a U.S. Treasury proposal to curtail corporate inversions goes well beyond its specific target and jeopardizes the ability of companies to engage in ordinary liquidity management, cash concentration and pooling activities that these firms use to minimize risk and efficiently manage cash.

We are speaking out on behalf of our clients.

On June 30, in response to a request for comment, we delivered an in-depth letter to Treasury Secretary Jack Lew outlining our concerns and laying out a path forward. Click here to view the letter. We also shared our concerns with various business and financial trade groups and the appropriate Congressional committees including the House Ways and Means Committee.

In the weeks since that letter, we understand that some progress has been made but considerable questions remain. Our sources suggest that Treasury is moving full speed ahead to issue final rules by late fall or early winter. We also hear that Treasury is aware of the strong public comment and attempting to move toward “bright line” tests. However, we’re not at all clear where Treasury will draw the bright lines.

Last week, House Ways and Means Chairman Kevin Brady and the Republican members of the committee issued an unusual letter to Secretary Lew. The letter comes after a meeting between the Ways and Means Finance Committee and the Treasury’s tax policy team in which Treasury indicated a willingness to provide an “exclusion” for cash pooling and “exceptions” for broader cash management practices.

However, the letter sounds two ominous notes:

  • These areas are all complex and it is not clear that your tax policy team has identified specific solutions that would appropriately and fully resolve these fundamental problems with the proposed regulations.”
  • Obtaining and incorporating input for the affected stakeholders in order to have confidence that the rules as recrafted would operate properly is too important to risk acting in haste.”

As the process continues, Treasury Strategies will continue our strong advocacy role and would appreciate your input. One specific thing you can do to greatly assist in our advocacy efforts is complete this short Flash Survey that helps us assess how this and other regulations are impacting corporations and financial institutions. The statistics we compile from a large sample size of your responses are compelling.

Treasury Strategies

For more information