Anti-inversion legislation could affect middle market companies
WHITE PAPER |
Since the publication of this article, the Treasury and IRS published Notice 2014-52, outlining their intent to issue new regulations targeted at reducing the tax benefits of corporate tax inversions. While not yet issued, the regulations will apply to inversion transactions completed on or after Sept. 22, 2014, and will focus on those transactions falling within the 60 to 80 percent U.S. shareholder ownership threshold that are perceived as abusive. For more information, read our tax alert Treasury and the IRS issue notice of new regulations to stop inversions.
Facing significant new costs associated with complying with the Affordable Care Act and other federal and state mandates and dimming prospects for corporate tax reform, many executives have considered redomiciling their corporate headquarters to a jurisdiction with more favorable tax rates. The recent flurry of companies announcing plans to expatriate and redomicile in a foreign country has caught the attention of the press, the U.S. Congress, and even the President.
In this white paper, we examine corporate inversion transactions and their potential tax benefits, including:
- Reduction of tax on future foreign earnings
- Potential repatriation of accumulated foreign earnings free of U.S. corporate tax
- Possible reduction of U.S. tax on U.S. business income through post-inversion planning
We also examine key provisions of the Stop Corporate Inversions Act of 2014, which would expand the scope of existing anti-inversion law in breathtaking ways. While it is unlikely that Congress will pass any significant tax legislation this year, public and private businesses of all sizes and in all industries should assess whether they are subject to existing anti-inversion rules and should understand the potential impact of these legislative proposals because continued inversion activity may finally spur Congress to action.