New guidance seeks to curb the incidence of inversions and reduce the associated tax benefits, but also extends beyond inversions.

On September 22, 2014, the US Department of the Treasury (Treasury) and the Internal Revenue Service (the IRS) issued Notice 2014-52 (the Notice) announcing their intent to provide regulations addressing the recent wave of certain cross-border M&A transactions commonly referred to as inversions.

Under existing anti-inversion provisions, a foreign corporation acquiring a US corporation is treated as a US corporation for US tax purposes if, among other requirements, the amount of stock (by vote or value) of the foreign acquiring corporation owned by former shareholders of the acquired US corporation following the acquisition by reason of ownership of the acquired US corporation (the inversion fraction) is at least 80 percent. If the former shareholders of the acquired US corporation own less than 80 percent but at least 60 percent of the shares, then certain limitations apply to the entire corporate group on the use of tax attributes, and an excise tax may apply to certain executive compensation.