On January 16, 2014, the Treasury Department and the Internal Revenue Service released new temporary regulations on one aspect of corporate inversions under Section 7874 (the “Regulations”) that altered and clarified the “Exclusion Rule” first announced by the IRS in Notice 2009-78 (the “Notice”). The Exclusion Rule had the potential of causing transactions that were primarily cash acquisitions to be subject to the inversion rules and causing a foreign acquiring corporation to be deemed a US corporation. The new Exclusion Rule, while in some ways broader than the Notice’s version, does contain a welcome de minimis exception. The de minimis exception will make it easier for a foreign corporate acquiror to acquire a US corporation or US partnership for cash consideration while allowingmanagement or other shareholders to roll-over into an equity interest in the foreign corporate acquiror without causing the foreign corporate acquiror to be deemed a US corporation.

On January 16, 2014, the Treasury Department and the Internal Revenue Service released new temporary regulations on one aspect of corporate inversions under Section 7874 (the “Regulations”) that altered and clarified the “Exclusion Rule” first announced by the IRS in Notice 2009-78 (the “Notice”). The Exclusion Rule had the potential of causing transactions that were primarily cash acquisitions to be subject to the inversion rules and causing a foreign acquiring corporation to be deemed a US corporation. The new Exclusion Rule, while in some ways broader than the Notice’s version, does contain a welcome de minimis exception. The de minimis exception will make it easier for a foreign corporate acquiror to acquire a US corporation or US partnership for cash consideration while allowingmanagement or other shareholders to roll-over into an equity interest in the foreign corporate acquiror without causing the foreign corporate acquiror to be deemed a US corporation.substantially all of the assets of a trade or business of a US partnership and the income or gain recognized by partners in the partnership in connection with the inversion.