Corporate inversions are not something new, but what is new is the Obama administration’s desire to stop them. Tax attorney Rob Wood discusses the situation, also the subject of his Forbes article “Obama Treasury Urges Halt Of Inversions For Foreign Headquarters & Tax Savings.” Corporate inversions have been the subject of a previous LBN report and an article by Wood.
Wood thinks that the government has never really turned a blind eye to these transactions, which have been going on for the past ten years. Congress tried to stop inversions, but more sophisticated corporate mergers got around the law. Now, the Obama administration wants to stop this latest wave of inversions.
The proposed change takes aim at the so-called 20% rule and would change the number to 50%. The objective, says Wood, is to require that a foreign company involved in a merger that would move the headquarters offshore would have to be the purchaser of the American company. In the meantime, Wood notes, companies are trying “to get in under the wire” and merge with foreign companies to take advantage of the lower tax rates in some foreign countries.
Ireland is an example of a country with a very favorable tax rate for corporations. Companies seeking to maximize their profits for shareholders have tried to take advantage of these foreign shelters. Wood suggests that one result of the inversion movement might be to take a look at corporate tax rates with a view to lowering them.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.