Sam Lichtman in Law360: Treasury Exercises Broad Authority With New Inversion Rules

09/24/2014


The U.S. Department of the Treasury made inversions less attractive Monday by stripping several key tax advantages from the recently popular transactions, crafting much tougher rules that attorneys say are likely to withstand legal challenges.

When the department said in August it wanted to issue an administrative remedy that would bypass Congress, detractors ballyhooed the idea as meaningless in the absence of fundamental tax reform and questioned whether the Treasury even had the authority to issue regulations on the matter. Monday's release hasn't quieted criticisms that the nation needs comprehensive tax reform instead of a one-off fix, but experts say the rules, which address narrow parts of inversion activity, were carefully based in Internal Revenue Code provisions that give the agency broad rule-making authority and still leave plenty of room for legislative action...

Haynes and Boone, LLP Tax Partner Sam Lichtman also wishes the Treasury would have issued more clarification on repatriations under Internal Revenue Code Section 956.

"The Treasury's attempt to stop taxpayers from avoiding the 956 repatriation rule through hopscotch loans is strong, but there are repatriation techniques that do not employ an inversion, so more comprehensive reform of 956 and clarifying when a loan from a CFC to a U.S. parent is classified as repatriation would be perhaps more helpful," he said.

Excerpted from Law360, September 24, 2014. To view full article, click here (subscription required).

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