Following the announcement of the controversial $152 billion Pfizer-Allergan merger, including its use of a so-called inversion, attention has turned to what the future holds for such structures.
The megamerger has stimulated debate on US tax reform, and coincides with fresh US Treasury and Internal Revenue Service (IRS) notice on the use of inversions and related transactions. As 2015 draws to a close, it seems these efforts will continue.
“We’ll see more guidelines from the IRS that will have an additional chilling effect on such transactions,” said Bernie Pistillo, partner at Morrison & Foerster.
Inversions are tax-efficient structures in which US companies combine with European companies. They then relocate to where corporate tax rates are lower. Such structures are especially attractive to companies with significant pools of un-repatriated foreign earnings.
In the US, however, those earnings are being...