By some measures, the United States imposes the highest nominal
corporate income tax of any OECD country.1 As a result,
a number of U.S.-based multinational corporate groups have recently
decided to lower their overall effective tax rate by expatriating
to another country. Generally this means combining with a foreign
(non-U.S.) partner corporation in an "inversion"
transaction. The trend toward inversion appears to be
accelerating.
In a typical inversion, a U.S. corporation and a foreign partner
effectively become subsidiaries of a new foreign holding company
located in a low-tax jurisdiction such as Ireland. Shareholders of
the U.S. corporation and its foreign partner transfer their shares
to the new foreign parent in exchange for parent stock and possibly
other consideration. The key to a successful inversion is that
former shareholders of the U.S. corporation must own less than 80%
of the stock of the new foreign parent. If the former shareholders
own 80% or more
