Corporate Inversion Rules Contain Bright-Line Substantial Presence Test

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Companies will have more certainty as to when they would be considered to have a substantial presence in a foreign country under a bright-line test in new proposed and temporary rules (REG-107889-12, T.D. 9592) on corporate inversions from IRS. IRS restores a tougher version of the safe harbor it yanked under proposed and temporary rules (REG-112994-06, T.D. 9453) the agency issued in 2009. The new rules are the agency's latest effort to implement tax code Section 7874, intended to stop abusive corporate inversions. IRS puts in place a new bright-line rule for determining whether expanded affiliated groups have a substantial foreign presence based on a 25 percent test rather than the 10 percent test in the 2009 rules.