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Section 2704 Proposed Regulations Identified for Burden Reduction in IRS Report

By Christopher C. Weeg on August 1, 2017

    I last provided an update on the proposed regulations under I.R.C. Section 2704 (the 2704 Proposed Regulations) on January 31, 2017, in which I covered President Trump’s then recent Executive Orders and their potential to halt the controversial 2704 Proposed Regulations. Since then, President Trump has called on the Treasury to identify burdensome tax regulations, and the fate of the 2704 Proposed Regulations (at least under the Trump administration) may be known as soon as September.

The Executive Order

    On April 21, 2017, President Trump issued Executive Order 13789, directing the Treasury to review all “significant tax regulations” issued on or after January 1, 2016, and to publish an interim report identifying regulations that (1) impose an undue financial burden on U.S. taxpayers, (2) add undue complexity, or (3) exceed the statutory authority of the IRS. The Treasury is to later submit a final report to the President recommending specific actions.

The Interim Report

    In Notice 2017-38, the IRS issued the interim report identifying the 2704 Proposed Regulations as one of eight regulations that meet at least one of the first two criteria from the Executive Order above (the IRS did not comment on exceeding statutory authority). The Notice stated the Treasury, in its final report to the President, intends to propose reforms—“potentially ranging from streamlining problematic rule provisions to full repeal”— to mitigate the burdens of these regulations. The Notice specifically mentioned the concerns raised by commenters that the 2704 Proposed Regulations would eliminate valuation discounts, make valuations more difficult, and increase transfer tax liability. Public comments on whether the regulations described in the Notice should be rescinded or modified—and in the latter case, how so to reduce burdens and complexity—are due by August 7, 2017.

    The Treasury expects to issue its final report to President Trump by September 18, 2017. Stay tuned for more updates, and if you have any questions in the meantime, please contact me at (214) 749-2430 or cweeg@meadowscollier.com.

    For prior coverage on the 2704 Proposed Regulations, read these previous firm blog posts: