New Inversion Notices Forthcoming

Our prior post on Notice 2014-52, Treasury’s crackdown on corporate inversions, outlined potential tools Treasury would consider using to counteract the attractiveness of inverting.  The Treasury Office of International Tax Council announced that at least one additional notice will likely be released prior to the issuance of the regulations, although the timing of the release is still unclear.

Douglas Poms, senior counsel at the Treasury Dept., stated that the upcoming notice(s) will address earnings stripping and “additional inversion issues.”  Poms indicated, however, that if the first notice does not include earnings stripping initiatives, it should not be construed as a policy shift, as Treasury regards earnings stripping as a broader change affecting areas other than inversions, such as financial products.

Without providing specifics, Poms listed some potential areas of focus:

  • Post-inversion U.S. tax benefits
  • “Inappropriate” use of treaties
  • Application of the 7874 ownership threshold test

Poms indicated the upcoming guidance will likely apply prospectively to transactions that follow inversions, but would affect any inversions occurring after the September 22, 2014 effective date of Notice 2014-52.  Retroactivity, however, could be included in any anti-avoidance rules promulgated by the department.

For more coverage of the upcoming guidance, read Tax Notes Today.

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