Last week, the Internal Revenue Service and Treasury Department
announced a number of new regulations intended to make it more
difficult to qualify for tax advantages associated with inversion
transactions and reduce certain of those benefits. Nonetheless, the
regulations, which are not retroactive and therefore only affect
future deals or pending transactions that have not yet closed,
appear unlikely to strip so much of the tax advantages associated
with inversions as to stem the inversion trend. In announcing the
regulations, however, Treasury Secretary Lew suggested that
additional rule-making was likely, thereby holding open the
possibility that future regulations may further reduce the tax
benefits to be secured from inversions. We discuss below the new
regulations, what they mean for companies that have signed
agreements to merge but not yet consummated the transactions and
the potential scope of future rulemaking by Treasury.
