Treasury’s Foreign Tax Notices Mask Growing Detrimental Policies

Dr. Jekyll and Mr. Hyde aren’t just characters in a novel. The two-sided character is reflected in the Trump administration’s three new sets of regulatory guidance designed to help corporate taxpayers comply with this summer’s tax policy overhaul.

While this guidance is sorely needed to clean up the mess created by a hasty Congress, these comparatively pedestrian notices stand in sharp contrast to the deregulatory, anti-tax approach that the Treasury Department has taken since the beginning of the year.

The new Treasury notices are, on their face, unremarkable. Each one clarifies arcane bits of the new tax law related to the foreign income of multinational corporations, and each was made more urgent by Congress’ haste to send the legislative package to President Donald Trump’s desk for his July 4 signature.

The legislative whirlwind left tax practitioners with a host of questions about how to prepare for the upcoming filing season. The December notices appear to clarify the law’s intent in basically noncontroversial ways. Apart from clarifying the details, Trump’s Treasury Department seems mainly interested in steadily dismantling the US tax system.

The administration telegraphed this intention in September, when it released the agency’s latest annual priority guidance plan. The report identifies implementing tax cuts and “deregulation” as top two short-term regulatory priorities—and reveals that the Treasury Department isn’t especially interested in much else.

The Biden administration’s last priority guidance plan identified 231 discrete regulatory projects that the agency prioritized; this year’s plan slashed the list down to just 105.

Good-government advocates wish the list was even shorter. As the Tax Law Center at NYU recently pointed out, the Trump administration’s regulations amount to a gradual regulatory repeal of the corporate minimum tax, an important backstop designed to ensure the biggest corporations pay at least a token amount of tax.

Enacting this provision subverts congressional intent. It now appears likely that the administration will double down on this by allowing deductions for research and development expenses to further weaken the minimum tax.

A group of senators earlier this month wrote to Treasury Secretary Scott Bessent urging him not to defy congressional intent by unilaterally adding billions of dollars to the cost of the latest tax cut by allowing R&D expenses to reduce CAMT income.

In an even more reckless regulatory about-face, Trump’s Treasury Department refused to implement the Corporate Transparency Act as Congress intended. Enacted in 2021, the CTA was a bipartisan effort to prevent money laundering by requiring companies to disclose their true owners to law enforcement agencies (although not to the public).

In March, the Treasury Department announced that it simply won’t enforce this law. A bipartisan group of senators wrote to Bessent that this decision was “inconsistent with the text and original policy goals of the CTA.” The US Court of Appeals for the Eleventh Circuit’s ruling lifting a CTA block dismisses only one legal obstacle to administering the CTA, leaving the real obstacle in place: the Trump administration’s illegal decision not to enforce it.

What makes Treasury’s turn galling is that the administration made a big fuss about its goal of rooting out regulations “that are not authorized by clear statutory authority.” Far from living up to this promise, Treasury officials appear to be writing statutes all by themselves.

Whether the administration’s pronouncements can be overturned through the legal process is unclear. A pair of 2024 Supreme Court cases—Loper Bright Enterprises v. Raimondo and Corner Post, Inc. v. Board of Governors—seem likely to spur a wave of litigation seeking to overturn the most zealous rulemaking across all executive agencies.

Balanced against this is the problem that few taxpayers have legal standing to challenge illegal regulations that simply cut taxes. But the unmistakable effect of the Trump administration’s regulatory overreach is to cast a shadow over the legitimacy of even more mundane pronouncements from the Treasury Department—like those issued this month.

In the short run, corporate tax practitioners will surely thank the Dr. Jekyll version of the Treasury Department for December’s tax notices. But the Treasury Department’s Mr. Hyde tendencies has produced a series of regulations and legal pronouncements that undermine federal tax laws rather than perfecting them and should plant a seed of doubt in the minds of anyone planning their affairs around federal tax rules.

Given the likelihood that a future administration will seek to reverse the Trump administration’s most detrimental regulations, tax practitioners seeking to advise their clients on the new foreign tax rules—to say nothing of the Corporate Transparency Act—should sound a cautionary note about the likely staying power of these regulations.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

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Matt Gardner is a senior fellow at the Institute on Taxation and Economic Policy.

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