Analysts Finding Scant Authority for Executive Action on Inversions

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

President Barack Obama is facing increasing pressure to bypass Congress and act on corporate inversions unilaterally—but many tax experts believe the administration would be on shaky ground in doing so.

“The arguments for Treasury regulation are based on laudable policy instincts, which I share,” said Edward Kleinbard, a professor of law at the University of Southern California, and former chief of staff of the U.S. Congress's Joint Committee on Taxation. “But they are very strained readings of the relevant regulatory authority.” In fact, he said, those arguments are so strained that they would do more harm than good to “Treasury's ongoing relationship with Congress, and its ability to take courageous stands through regulation in the future.”
In tax policy discussions, the term “inversion” refers to a merger with an offshore entity that is undertaken to establish tax residency abroad and cut a company's tax bill. A recent string of inversions and proposed inversions has brought a spotlight to the practice, and has led to calls for government actions to stop it.