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Flawed Proposal Misidentifies Ordinary Business Transactions

WASHINGTON (July 7, 2016)The American Chemistry Council (ACC) issued the following statement upon filing comments with the U.S. Department of the Treasury regarding its proposed debt-equity regulations under Internal Revenue Code section 385, released on April 4, 2016.

“We have serious concerns with Treasury’s proposal, which is intended to address corporate tax inversions, but will instead disrupt ordinary business transactions that create jobs. Companies have long relied on intercompany loans as a way to manage cash flows and fund new projects, yet the regulations treat all such debt as suspect, jeopardizing U.S. investment and growth.

“These rules intrude deep into the capital structure and day-to-day operations of a business. When a routine loan is re-classified as ‘stock,’ it has severe ripple effects throughout the finances of a company. It may even result in a new legal ownership designation or different obligations under tax treaties. Under this proposal, companies will also have to meet new documentation requirements that increase transaction costs without any incremental benefit.

“The U.S. chemical industry has been a vital source of investment in American manufacturing. Since 2010, our companies have announced 267 projects valued at $163 billion, all linked to plentiful and affordable supplies of energy and feedstock. These new facilities and expansions could create 738,000 permanent new jobs throughout the economy by 2023. All of the projects rely on their company’s internal treasury functions to provide timely, reliable and efficient funding.

“We urge the Administration to withdraw its proposed regulations to avoid undue harm to the U.S. chemical industry and other businesses that contribute so much to our economy. We hope to work with staff at the Treasury Department and the Internal Revenue Service to further explain our concerns.”

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