Treasury’s game of Whac-A-Mole: Keeping corporate taxes in the USA

We’ll soon find out how good the Treasury is at Whac-A-Mole.

And we’ll also see if the written word — specifically, a recent article in Tax Notes, a hard-core tax-techie specialty publication — has the power to influence events. Which in this case, I hope it does.

Let me explain what’s going on. And why you should care about it.

Any day now, the Treasury is expected to unveil the final version of proposed regulations it issued in 2014 and 2015 to stop corporate inversions. “Inversion” is a euphemism for a transaction in which a corporation deserts our country by combining with a smaller foreign company, adopting its headquarters for tax purposes but keeping its operations based here to continue enjoying all the benefits — like strong capital markets, rule of law, military protection and great places for employees to live — it derives from being in the United States.

The question is whether the Treasury will try to extend its proposed regulations to cover deals involving Pfizer, Johnson Controls and IHS. Those three transactions would end-run the regulations unless the Treasury broadens them. It’s Whac-A-Mole, with billions of tax dollars at stake. As things stand now, the only transactions covered by Treasury’s proposed regulations are those in which shareholders of the deserting U.S. company own more than 60 percent but less than 80 percent of the shares in the combined company.

Read more: Washington Post


Allan Sloan is a columnist for The Washington Post. He is a seven-time winner of the Loeb Award, business journalism’s highest honor. View Archive


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