Beware The Pac-Man Rule—Or Not

Among the landmarks of 1980s popular culture was a wildly successful arcade game: Pac-Man. The goal? To steer Pac-Man through a series of mazes, devouring Pac-Dots and enemies as quickly as possible.

The changing obstacles posed by the U.S. tax "inversion" regime bear more than a passing resemblance to Pac-Man. In an inversion, a U.S.-based multinational corporate group seeks to expatriate to another country to reduce its overall effective tax rate and realize significant tax savings. But the inversion rules also apply to multinationals based outside the United States.

Foreign multinationals soon discovered they could side-step the 80 percent rule, as long as they acquired U.S. targets that were not too "big."