Revised Temporary Regulations Under Code Sec. 7874 Address Surrogate Foreign Corporations

Treasury and the Internal Revenue Service (IRS) have issued revised temporary regulations under Internal Revenue Code ("Code") section 7874 concerning the determination of whether a foreign corporation is treated as a surrogate foreign corporation. The regulations primarily affect certain foreign corporations that acquire substantially all of the properties of domestic corporations or partnerships (so-called "inversion" transactions). The regulations replace temporary regulations on surrogate foreign corporations published in 2006 that recently sunset on June 6. Although the temporary regulations are effective June 12, 2009, the regulations provide that they apply to acquisitions completed on or after June 9, 2009.