Bold Regulatory Action by Treasury, Hoping to Prevent Inversions and Address Earnings Stripping

    View Authors April 2016

    On April 4, 2016, the US Department of the Treasury issued temporary regulations that target inversion transactions pursuant to Sections 304, 367, 956, 7701(l), and 7874 of the US Tax Code and proposed “earnings stripping” regulations pursuant to Section 385. This regulation package includes both the long-awaited anti-inversion rules promised in Notice 2015-79 and Notice 2014-52 and brand new provisions not part of those Notices.

    Beyond a substantive discussion of key portions of Treasury’s proposals, this alert provides an overview of where policymakers stand – and where they might be headed – in terms of congressional action to curb corporate tax inversions. With Congress divided over how to proceed (i.e., with Republicans focused on reforming the nation’s Tax Code and Democrats bent on directly addressing inversions through ant-inversion legislation), coupled with the fact that tax reform is unlikely for at least another year, it isalmost certain that the timing and substance of any potential anti-inversion legislation will be determined in November as the American electorate heads to the polls.