On September 22, 2014, the Department of the Treasury and the Internal Revenue Service announced plans to issue anti-inversion regulations, which will:
- Make it more difficult for the former owners of a U.S. entity to own less than 80 percent of the new foreign entity by disregarding (i) certain stock of a foreign acquiring corporation holding significant passive assets and (ii) any pre-inversion extraordinary dividends distributed by the U.S. entity;
- Prevent a U.S. entity from transferring a portion of its assets to a newly-formed foreign corporation that is then spun-off; and
- Prevent an inverted company from accessing overseas earnings or cash of foreign subsidiaries.
These new regulations will generally apply to transactions completed on or after September 22, 2014. In addition, Treasury and the IRS expect to issue additional guidance to further limit inversions. To the extent this additional guidance applies only to inverted groups, such additional guidance will also apply to transactions completed on or after September 22, 2014.
The Treasury Department Fact Sheet is below and, if requested, we are happy to forward a copy of IRS Notice 2014-52, which provides additional information regarding the anti-inversion regulations.