There may be significant legislative and regulatory activity over the next few months as the US Congress and the Obama Administration continue to grapple with corporate tax inversions. While it remains unlikely that anti-inversion legislation will be enacted in September, policymakers may continue to utilize various legislative tools, including the annual appropriations process, in an effort to discourage inversion transactions. Beyond legislation, the Administration’s promise to examine its regulatory options to curb inversion transactions will have all eyes on Treasury as it determines what steps to take.
Corporate inversions, whereby a US corporation acquires a non-US corporation and, in the process, relocates its headquarters abroad, have been the ongoing focus of heated political discourse, as a number of US companies have announced inversion deals in recent months. With heavy politicking, media hype, and threatened legislation and regulation, it has become increasingly difficult to identify exactly what issues companies need to consider when assessing the risks associated with an inversion transaction. This alert analyzes the likelihood for implementation of recent proposals to deter inversions and assesses the potential impact of each proposal. These issues are significant for US companies that have already inverted, have announced an intention to invert, or may consider inverting in the future. Further, many of the possible policy responses – whether legislative or regulatory – could have considerable ramifications for the larger US inbound investment community.
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