Will Treasury Use Subpart F to Attack Inversions? Analysts Expect Rule

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...

Sept. 12 —  As practitioners await possible action from the Department of Treasury to stem the tide of corporate tax inversions, many observers think that a modified Subpart F rule—rather than more sweeping rules to combat earnings stripping—is the likeliest route for regulations.

Such an action couldn't stop inversions, which occur when a U.S. corporation, often through a merger with a foreign competitor, establishes a parent company with tax residency abroad. But it could reduce their financial attractiveness by closing off some of the pathways inverted companies have used to access profits currently being held in controlled foreign corporations.

Inversions have come under intense political scrutiny recently after several high-profile companies have completed or considered the transactions—one recent example being Burger King Worldwide Inc.'s merger with Canadian breakfast fast food chain Tim Hortons Inc. (165 DTR G-2, 8/26/14).