Articles

U.S. Treasury Aims to Curb Corporate Tax Inversions by James W. Spencer, CPA


Posted on September 24, 2014 by Jim Spencer

In the absence of anti-inversion legislation by Congress, the U.S. Treasury has recently taken matters into its own hands and announced the steps it will take to stem the rising tide of U.S. companies attempting to avoid or reduce their U.S. tax liabilities by moving their headquarters overseas.  The Treasury’s announcement aims to make tax inversions more difficult and less attractive to U.S. companies.

 

U.S. companies continue to pay U.S. taxes on income generated by U.S. operations after going through an inversion. The purpose of an inversion is to avoid paying U.S. taxes on income generated by foreign operations.

 

According to the Treasury, cross-border mergers that closed before Sept. 23, 2014, will not be subject to the new regulations. However, companies whose deals are in the works, including Burger King, which plans an inversion to Canada through a merger with Tom Hortons, will need to address the following new rules:

 

 

 

 

 

A former chairman of the Senate Finance Committee issued a statement objecting to the Treasury Department’s new approach to inversions, indicating that anti-inversion legislation should be accomplished by Congress and the executive branch. A policy analyst commented that Treasury risks exceeding its authority and may face a legal challenge from companies with pending inversions that are made invalid by the changes.

 

The advisors and accountants with Berkowitz Pollack Brant stay up-to-date with regulations affecting domestic and foreign businesses and develop strategies to maximize tax efficiencies related with international mergers.

About the Author: James W. Spencer, CPA, is a director in Berkowitz Pollack Brant’s Tax Services practice.  He can be reached in the Miami CPA firm’s offices at 305-379-7000 or via email at info@bpbcpa.com.