IRS And Treasury Issue More Guidance On "Inversion" Transactions

The Treasury Department and the Internal Revenue Service have issued additional guidance about so-called "inversion" transactions. Generally, an inversion transaction results where a U.S. corporation ("U.S. Target") is acquired by a non-U.S. corporation ("Non-U.S. Acquirer"), but with the U.S. Target's historic shareholders continuing as significant equityholders of the Non-U.S. Acquirer after closing. The U.S. federal income tax consequences of inversion transactions vary based on a number of factors, including the extent of the U.S. Target shareholder's continuing equity stake, but in the broadest possible sense, an inversion can have the result of reducing the U.S. Target's gross income subject to U.S. corporate tax post-inversion. These transactions are not new – a number of statutory provisions have been enacted by the U.S. Congress (notably, Sections 367 and 7874), and various regulatory projects and other administrative guidance have been issued by the Treasury