- The “Very Near Future” is Now: Treasury and IRS Release Anti-Inversion Notice
- September 25, 2014
- Law Firm: Sutherland Asbill Brennan LLP - Washington Office
After much anticipation, the Treasury Department and IRS released new “anti-inversion” guidance on September 22, in Notice 2014-52. The Notice announces forthcoming regulations that are targeted at reducing some of the perceived economic benefits of inverting. The forthcoming regulations would apply primarily to companies which complete inversions on or after September 22, 2014, and generally would:
- Expand the reach of section 7874 inversion rules by requiring certain adjustments to the value of U.S. target and foreign acquiring corporation shares to reflect pre-transaction distributions and certain non-ordinary course transactions;
- Limit the ability of a foreign acquiring corporation to access cash held by controlled foreign corporations (“CFCs”) of the U.S. target corporation without triggering deemed dividends to the U.S. target corporation under section 956;
- Restrict the ability of the foreign acquiring corporation to “de-control” CFCs through direct investment from outside the U.S. group;
- Modify the application of section 304 to all transactions involving CFCs to prevent CFC earnings from “hopscotching” the U.S. target corporation in deemed distributions.
Sutherland will be releasing more analysis on the new rules in the very near future.
Read the Treasury Department’s summary of the Notice
Read Notice 2014-52.