NUMBER OF THE WEEK: $1.64 Billion.
The “break-up fee” that Illinois-based pharmaceutical company AbbVie Inc. must pay Ireland-based Shire Plc. for backing out of the $54 billion cross-border merger deal that was called off last week due to the U.S. Treasury Department’s recently released anti-inversion regulations. But, this breakup has a silver (or gold) lining — it’s tax deductible.
Congress remains in recess until after the Nov. 4 midterm elections.
Wyden Welcomes AbbVie Breakup. Senate Finance Committee Chairman Ron Wyden (D-OR) said in a statement that “[i]t’s encouraging that companies like AbbVie, and their shareholders, recognize the strategic business value of remaining an American company.” Wyden also said he would continue “examining the issue” of inversions while working with his Republican counterparts toward comprehensive tax reform. Republicans have remained mum on the AbbVie/Shire split.
Inversions on the Campaign Trail? Republicans seeking re-election or a first-time seat in Congress are also keeping mostly mum on the corporate inversion issue. Meanwhile, Democrats are seemingly having little success in their efforts to label their Republican opponents as favoring “corporate tax breaks that help ship jobs overseas” — which is a much more campaign friendly (if not entirely inaccurate) way of describing a cross-border merger in which a U.S. multinational company moves its tax residence abroad.
In the race for the open Georgia Senate seat, Democrat contender Michelle Nunn is perhaps having the most success playing off inversion-like rhetoric — but that’s mostly because her opponent, Republican David Perdue, was quoted in a deposition saying he “spent most” of his career outsourcing domestic companies’ production as part of business reorganizations. Nunn is gaining, or even slightly ahead, in the polls, depending on which one you believe. The tight race is one of six seats that Republicans would need to pick up in order to regain the majority in the Senate — assuming, of course, that incumbent Senator Pat Roberts (R-KS) doesn’t lose to Independent challenger Greg Orman. But back to Georgia, where if neither Michelle Nunn nor David Perdue wins by more than 50 percent of the vote, we could be waiting for a January run-off election to determine the winner, and possibly to determine which party holds the majority in the Senate. However, most polls predict the GOP will win the majority regardless of the outcome in Georgia.
Where the Streets Have No … Tax Deals?
Ireland Finance Minister Michael Noonan announced last week that the country would end its “Double Irish” tax structure, a tax-reduction strategy popular among U.S.-based tech firms. The lead singer of one of Ireland’s most famous exports — U2’s Bono — has defended the tax break, saying it has brought Ireland “the only prosperity we know.”
The “Double Irish” allows companies to shift untaxed revenues from high-tax countries to havens, typically by setting up a subsidiary in Ireland that can then re-route royalty payments for intellectual property and other payments to another Irish-registered subsidiary located in a no-tax or low-tax jurisdiction, like Bermuda.
Companies that already use this structure have four years before it’s phased out, but beginning in January 2015, new entrants will be required to keep their tax residency — and their revenues — in Ireland if they want to take advantage of its 12.5 percent corporate tax rate and other benefits.
The Federal Deposit Insurance Corporation
On Tuesday, Oct. 21, the FDIC Board of Directors will meet to consider the final credit risk retention rule.
Department of Labor
On Tuesday, Oct. 21, the DOL’s Employee Benefit Security Administration (EBSA) will host a symposium in honor of the 40th anniversary of the Employee Retirement Income Security Act (ERISA). DOL Secretary Thomas Perez, assistant secretary of EBSA, Phyllis Borzi and other past and current EBSA officials are expected to discuss the past, present and future of the landmark law. The event will be livestreamed from 9:00 am through 1:00 pm here.
The Securities and Exchange Commission
On Wednesday, Oct. 22, the SEC will meet to consider the final credit risk retention rule.
On Friday, Oct. 24, SEC Commissioners Kara Stein and Dan Gallagher, along with other senior SEC officials, will join panelists covering enforcement and regulatory developments during the Los Angeles County Bar Association’s annual Securities Regulation Seminar.
Board of Governors of the Federal Reserve
On Wednesday, Oct. 22, the Federal Reserve Board of Governors will meet to consider the final credit risk retention rule.
Tuesday, Oct. 21
The D.C. Bar Taxation Section will host a full-day discussion on the Tax Reform Act of 2014 (the Camp Draft). More information can be found here. Featured panelists include:
- Thomas Barthold, chief of staff, Joint Committee on Taxation, Keynote Address
- Ray Beeman, former House Committee on Ways and Means majority staff, Financial Instruments, International
- Paul Chen, Joint Committee on Taxation staff, International
- Laurie Coady, Joint Committee on Taxation staff, REITs and RICs
- Aharon Friedman, House Committee on Ways and Means majority staff, Individuals/AMT, Employee Benefits, Executive Compensation
- Viva Hammer, Joint Committee on Taxation, Financial Instruments
- Patricia McDermott, Joint Committee on Taxation staff, Employee Benefits, Executive Compensation
- Cecily Rock, Joint Committee on Taxation staff, Business (Corporate/Partnership)
- Karl Russo, Joint Committee on Taxation staff, Business (Corporate/Partnership), Financial Instruments
- Sean Hailey, House Committee on Ways and Means majority staff, International
- Harold Hancock, House Committee on Ways and Means majority staff, Business (Corporate/Partnership), Exempt Organizations, REITs and RICs
Friday, Oct. 24
The Los Angeles County Bar Association will hold its 47th Annual Securities Regulation Seminar, focusing on current events and developments in the securities field, including discussions of SEC priorities as well as an overview of judicial, regulatory and enforcement developments; recent trends in Securities and Exchange Commission (SEC) enforcement; the public and private offerings of securities; regulation of investment advisers; and other matters of interest to the securities bar. A complete agenda is available here. Notable speakers include:
- Kara Stein, commissioner, SEC
- Daniel Gallagher, commissioner, SEC
- Andrew Ceresney, director, SEC Division of Enforcement
- Keith Higgins, director, SEC Division of Corporation Finance