Amid the Trump administration’s deregulatory efforts, some tax experts cautioned that revamping and simplifying rules could lead to greater uncertainty – and ‘gut’ the Tax Code.
While a key Treasury official defended the administration’s actions at the D.C. Bar Tax Conference January 8, other panelists shared their concerns. And tax practitioners at a PwC media briefing a day later discussed the real-world impacts of deregulation on businesses.
Treasury Push to Put Statutes ‘Back in the Box’
Treasury Deputy Assistant Secretary for Tax Policy Kevin Salinger framed the Trump administration’s deregulatory effort as a move to correct regulatory overreach. “I think of deregulation more as putting the statute back in the box where it belongs,” Salinger explained.
He argued that past regulations, while well-intentioned, had become overly burdensome. “We are targeting some of these highly complex academic ivory tower sort of structures that have been built up over the years,” said Salinger. He called such regulations “well-intentioned,” but contended they “create enormous burdens and distort market activity.”
Salinger pointed to several areas where the current administration believes regulations go too far, including the stock buyback excise tax. While most people would assume the tax applied simply to stock buybacks, the proposed regulations expand the scope to “M&A activity” and “international financing,” he said. Salinger also cited the disregarded payment loss (DPL) rules and basis shifting reporting rules as other projects where the administration has sought to roll back complexity.
Concerns of ‘Gutting Statutes by Regulation’
Other panelists at the D.C. Bar event, however, argued that the Trump administration’s actions amounted to an unlawful dismantling of the Tax Code. “A better interpretation of what we’re seeing is essentially statutes being gutted by regulatory choices,” said the Yale Budget Lab’s Natasha Sarin. She argued that the administration was overstepping its legal authority “to unilaterally make those choices in the name of private business.”
Sarin and others focused on recent and potential changes to the corporate alternative minimum tax (CAMT), a tax based on the income companies report to shareholders, which was designed to ensure large, profitable corporations pay a minimum level of tax.
NYU Law’s Lily Batchelder, who served as Treasury assistant secretary of tax policy during the Biden administration, highlighted a notice that allows corporate taxpayers to calculate their income from partnership interests for CAMT purposes by “shaving off 20%” from their financial statement income. “I don’t see any policy or legal rationale for that,” said Batchelder. “That’s not the way the statute is worded.”
Batchelder also raised concerns about efforts to allow corporations to account for retroactive research expensing now available under the One Big Beautiful Bill (OBBB) when calculating CAMT. Kyle Pomerleau, an economist at the American Enterprise Institute, seconded those concerns, stating “I don’t think it’s wise to poke a hole in the corporate alternative minimum tax for unused amortization deductions.” In his view, “that’s a tax cut for past economic activity.”
Pomerleau also more broadly warned of the risks of Congress delegating its taxing authority. “Agencies may enact regulations that may be inconsistent with congressional intent, and that may just undermine the legitimacy and public perception of the Tax Code,” he said. Another concern for Pomerleau is the lack of transparency. “Congress debates, they hold hearings, there’s discussion of why decisions are made,” explained, but “Treasury might not have that same process.”
Business Taxpayer Perspective
PwC U.S. National Tax Office Co-Leader Pat Brown, speaking during a January 9 media briefing, stressed that businesses seek tax stability. The certainty provided by the OBBB was a “huge sigh of relief” for clients making capital allocation decisions, according to Brown. However, “simplification is really, really hard,” he added.
In Brown’s view, Congress in the OBBB “answered 80% of the questions that taxpayers are going to have.” But he added “that leaves a really important 20% of questions that still have to be answered with respect to the parameters of those rules taxpayers are obviously going to be looking for.”
And reducing regulatory complexity is a challenge when taxpayers are seeking answers to complicated questions. Brown noted that Treasury puts out regulations in response to taxpayer inquiries. He questioned whether taxpayers are “prepared to have regulations that are more straightforward, more principles-based,” if the price is not getting “a lot of answers to questions.”
Beyond unanswered questions, business taxpayers are discovering “unexpected interactions” between new provisions and pre-existing law, Brown noted. Among those are the interaction of CAMT and the “catch-up deduction” for research expenses. And while taxpayers are asking Treasury to provide relief, how much relief is provided “very much remains to be seen,” according to Brown.
Critics Argue Uncertainty Remains
Some D.C. Bar panelists also warned of potential fiscal and economic consequences of the Trump administration’s deregulatory approach amid increased use of executive power.
Pomerleau pointed to the use of executive power to enact tariffs as an example of how unilateral action creates “a lot of economic downside for taxpayers.” He argued that the “speed and inconsistency” of these changes is something that “probably wouldn’t occur if Congress were in charge.” Sarin noted that “the next administration might not have those same postures” and could “undo some of the choices that are being made, which introduces a ton of volatility from the perspective of taxpayers.”
Beyond the uncertainty, Sarin stressed the severe revenue implications of certain deregulatory efforts, particularly at a time of “quite dire” national finances. “You are essentially undoing the hundreds of billions of dollars in revenue that was expected to be collected, and not requiring that Congress or any policymaker actually account for that in any real way,” Sarin said. This is not a space where the executive branch “should unilaterally be acting,” she added.
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