New regulations from the Treasury Department will make these co-called corporate inversions less lucrative by barring creative techniques that companies use to lower their tax bill. Additionally, the U.S. will make it harder for companies to move overseas in the first place by tightening the ownership requirements they must meet.
"This action will significantly diminish the ability of inverted companies to escape U.S. taxation," Treasury Secretary Jacob Lew said. He added that for some companies considering inversions, the new measures would mean inverting would "no longer make economic sense." [snip]
Three new measures will seek to stop companies from finding ways to access earnings from a foreign subsidiary without paying U.S. taxes, including "hopscotch" loans, in which companies shift earnings by lending money to the new foreign parent company while skipping over the U.S.-based company.
Another rule change would make it harder for merged or acquired companies to benefit from lower foreign taxes by tightening the application of a law that says the American company's shareholders must own less than 80 percent of the new, combined company. The administration would like to reduce that percentage to 50 percent, but that will require legislation. In the absence of legislation, the administration says its new rules will make it harder for companies to get around the 80 percent requirement by prohibiting certain arrangements, such as a firm making large dividend payments ahead of the acquisition to reduce its size on paper.The rules, being drafted now, will be effective retroactively to today. As one might have expected, the Chamber of
Is it any wonder why "greed" is the first word Americans think of when "corporations" are mentioned?
