IRS Final Rules on Corporate Inversions: Tax Planning Techniques and Best Practices in Structuring Deals

Revisions to Section 7874, Stock Ownership and Substantial Business Activities Tests, Passive Asset Rule, and More

A live 90-minute premium CLE webinar with interactive Q&A


Thursday, December 20, 2018

1:00pm-2:30pm EST, 10:00am-11:30am PST

Early Registration Discount Deadline, Friday, November 30, 2018

or call 1-800-926-7926

This webinar will provide counsel, tax professionals and advisers with guidance on IRS final regulations on corporate inversions and tools to structure deals in inversion transactions. The panel will discuss the most significant revisions to Section 7874 and regulations, including modifications to the passive asset and serial acquisition rules, rules addressing certain post-inversion tax avoidance transactions, and other changes impacting the structure and intended tax benefits of an inversion.

Description

On July 11, 2018, the Treasury and the IRS published final inversion regulations which include significant changes to Section 7874 and related regulations. The final regulations target corporate inversions with rule modifications regarding passive assets, acquisitions and post-inversion tax avoidance transactions, along with other items impacting the planning and intended tax benefits of a corporate inversion.

Inversions are transactions that involve the acquisition of a U.S. corporation or business by a foreign corporation in exchange for shares when the former shareholders of the U.S. corporation own 60% or more of the acquiring foreign corporation. Section 7874 requires an examination of the shareholder overlap between the domestic corporation and the acquiring foreign corporation before and after a transaction to determine whether to treat the foreign acquiring corporation as a domestic corporation or to limit its use of specific tax attributes.

The final regulations increase when to strictly apply Section 7874 rules and tests to inhibit tax avoidance transactions, which could result in a foreign corporation’s income being subject to U.S. tax like any other domestic corporation, regardless of the source of that income.

The final regulations address transactions structured to avoid 7874 limits by providing rules for: (1) identifying domestic entity acquisitions and foreign acquiring corporations in transactions; (2) calculating the ownership percentage; (3) determining when stock of a foreign acquiring corporation is treated as held by a member of an expanded affiliated group (EAG); and (4) establishing when an EAG has substantial business activities in a relevant foreign country.

The changes to Section 7874 require counsel and tax professionals to give critical analysis to any transaction in which a foreign corporation is acquiring equity in, or the assets of, a domestic corporation or partnership.

Listen as our panel discusses the most significant changes to Section 7874, the rules and tests applicable to inversion transactions, and tax planning mechanisms to achieve the intended tax benefits when structuring deals involving inversion transactions.

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Outline

  1. IRS final regulations for Section 7874 and most significant changes
  2. Applicability of Section 7874 to certain inversion transactions and exceptions
  3. Types of inversions and structuring the transaction
  4. Capturing the benefits of an inversion
  5. Post-transaction integration and restructuring
  6. Rules addressing certain post-inversion tax avoidance transactions
  7. Best practices and planning techniques for structuring inversion transactions and obtaining intended tax benefits

Benefits

The panel will discuss these issues and relevant points:

  • Types of inversion transactions and requirements of Section 7874
  • Using inversion transactions to limit U.S. taxation and assist in the use of non-U.S. earnings to acquire U.S. businesses
  • Acquisition rules and ownership tests addressed by the IRS final regulations
  • Section 7874 de minimus exception and expansion thereof
  • Rules addressing post-inversion transactions
  • Tax planning for structuring inversion transactions and obtaining intended tax benefits
  • Best practices for post-transaction integration and restructuring

Faculty

Crouse, Elizabeth
Elizabeth C. Crouse

Partner
K&L Gates

Ms. Crouse provides business-focused advice and solutions for U.S. federal, state, and international tax considerations...  |  Read More

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