Policy and Legal

Several last-minute regulatory actions by the outgoing Biden Treasury Department are “clear example[s] of regulatory overreach” that should be withdrawn immediately, the NAM told the Biden administration recently.

What’s going on: The Treasury Department has proposed new guidance and regulations that, if finalized, would change the IRS’s treatment of related-party transactions, particularly as they relate to partnerships.

• The proposed standards would impose significant reporting obligations on manufacturers while also drastically changing the tax treatment of these commonplace payments.
• Additionally, Treasury has proposed new rules governing “dual consolidated losses” that would make it more difficult for manufacturers operating in multiple jurisdictions around the world to utilize their tax losses appropriately.

Why it’s problematic: The proposed standards are outside Treasury’s statutory authority and are “unlikely to withstand inevitable judicial scrutiny,” the NAM told the agency at the end of 2024.

• In December, the NAM laid out the legal issues endemic to Treasury’s proposals, identifying both substantive and process-related issues that undermine each action.
• The submission builds on manufacturers’ comments to the agency on the proposals themselves: The NAM said in July that the related-party guidance was “wholly unauthorized, unsupported and unsupportable” and in August told the agency that the related-party rules “would impose an undue burden on taxpayers that outweighs any potential compliance benefit.”
• It added in October that the dual consolidated loss proposal was “internally inconsistent” and “fail[ed] to reflect reasoned decision-making.”

Regulatory onslaught: The NAM has been at the forefront of pushing back on the Biden administration’s regulatory onslaught, which costs manufacturers upward of $350 billion every year.

• Shortly after the 2024 presidential election, the NAM led a group of more than 100 manufacturing associations in urging the incoming Trump administration to “address burdensome regulations that are stifling investment, making us less competitive in the world, limiting innovation and threatening the very jobs we are all working to create right here in America.”

What’s next: The NAM is calling on the Biden Treasury Department not to finalize these proposals in the administration’s final days, but rather to pause or withdraw the rules in question until the Trump administration takes office.
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