Treasury Considering Ways to Limit Earnings Stripping

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Oct. 29 — The government is considering several possible ways to limit earnings stripping, a Treasury Department official said.
Brenda Zent, a taxation specialist in Treasury's Office of the International Tax Counsel, said Oct. 29 talks are ongoing as officials work on guidance to follow the controversial Notice 2014-52, the department's September guidance intended to curb corporate inversions.
Speaking at a luncheon sponsored by the D.C. Bar Taxation Section, Zent said it isn't yet clear what will be in the guidance or when it will be issued. But she outlined two possible avenues to limit earnings stripping. One would cut back the deductibility of interest under provisions such as tax code Section 163(j). A second would treat what taxpayers might consider a debt instrument as an equity instrument under Section 385, Zent said.