Treasury to Block ‘Hopscotch Loans' in Bid to Curb Inversions

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Sept. 22 — The Treasury Department may lack the ability to halt corporate inversions, but it can make them less appealing by blocking the use of “creative” intracompany loans, spin-offs and asset transfers to foreign subsidiaries.
In a series of actions announced Sept. 22, Treasury said new rules applying to future deals include a prohibition on “hopscotch” loans that let companies access foreign cash without paying U.S. taxes, as well as language to stop inverted companies from restructuring a foreign subsidiary in order to access its earnings tax-free under Section 7701(l).
Treasury Secretary Jacob J. Lew said in a conference call announcing the action that because Congress didn't act to stop inversions before the lame-duck session, an administrative solution was needed. Still, the new rules will not outlaw the cross-border merger deals, and Lew called on lawmakers to deliver an anti-inversion bill.

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