Penn State Law's Center for the Study of Mergers and Acquisitions hosted a free, public interest webinar featuring U.S. Treasury and IRS officials involved in the drafting of Notice 2015-79 on tax inversions, which was issued on Nov. 19. The hourlong webcast aired live at 12:30 p.m. EST on Dec. 10. 

Watch the Archived Webcast    

Either a PC with Firefox or a Mac with Safari is required to view this video. You may be required to install or update Silverlight.

Slides

Brian Davis' Materials (PDF)
Samuel Thompson Materials (PDF)
Samuel Thompson Materials (2) (PDF)

The webinar consisted of a panel discussion featuring:

• Brenda Zent, special adviser, Office of the International Tax Counsel, U.S. Department of the Treasury (invited)
• Shane M. McCarrick, assistant to the branch chief, Branch 4, Office of Associate Chief Counsel (International), Internal Revenue Service
• Brian Davis, tax partner in the Washington, D.C., office of Ivins, Phillips & Barker and an expert on international tax and inversions
• Samuel C. Thompson, Jr., (moderator) professor of law and director of the Center for the Study of Mergers and Acquisitions at Penn State Law and author of several articles on tax inversions.

Background

On Nov. 19, the Treasury and IRS issued Notice 2015-79 on tax inversions (the 2015 Notice). This 2015 Notice is a follow-up to Notice 2014-52, which was issued by the Treasury and IRS on September 22, 2014 (the 2014 Notice). Both Notices announce administrative steps the Treasury is taking on tax inversions. Inversions are transactions that employ complex corporate transactions to cause a U.S. company and a foreign company to become subsidiaries of a new foreign holding company with the shareholders of the U.S. company owning a controlling interest in the new holding company.

A fact sheet issued with the 2015 Notice gives the following background:

Only legislation can decisively stop inversions. The Administration has been working together with Congress for several years in an effort to reform our business tax system, make it simpler and more pro-growth, and address the incentives that encourage companies to engage in inversions.

In the absence of legislative action, on September 22, 2014, Treasury announced guidance that both made it more difficult for U.S. companies to invert and reduced the tax benefits of doing so by eliminating techniques used by inverted companies to access overseas earnings without paying U.S. tax. Today, Treasury is taking additional actions to make it more difficult for U.S. companies to invert and to further reduce the tax benefits of inversions.

Specifically, today’s notice makes it more difficult for U.S. companies to invert by:

Strengthening the requirement that the former owners of a U.S. company own less than 80 percent of the new combined entity

Limit the ability of U.S. companies to combine with foreign entities when the new foreign parent is located in a “third country” (Action under section 7874 of the code) * * *

Limit the ability of U.S. companies to inflate the new foreign parent corporation’s size and therefore avoid the 80-percent rule.  (Action under section 7874 of the code) * * *

Strengthening the substantial business activities exception (Action under section 7874 of the code) * * *

Specifically, today’s notice reduces the tax benefits of inversions by:

Preventing inverted companies from transferring foreign operations “out from under” the U.S. tax net without paying current U.S. tax

Expand the scope of inversion gain for which current U.S. tax must be paid (Action under section 7874 of the code) * * *

Require that all built-in gain in CFC stock be recognized, without regard to the amount of deferred earnings, upon a restructuring of the CFC (Action under section 367 of the code) * * *

Make corrections to the rules in Notice 2014-52 that limit the ability of U.S. companies to invert:

Limit the ability of companies to count passive assets that are not part of the entity’s daily business functions in order to inflate the new foreign parent’s size and therefore evade the 80-percent rule – known as using a “cash box.”  (Action under section 7874 of the code)  * * *

Prevent U.S. companies from reducing their size by making extraordinary dividends.  (Action under section 7874 of the code) * * * *