Nov. 19, 2014
By A’Dair Flynt, Senior Associate
In a letter dated July 15, 2014, Treasury Secretary Jacob J. Lew asked Congress to pass retroactive legislation that would halt United States companies from engaging in inversion transactions. A corporate tax inversion or expatriation is a “transaction in which a U.S. based multinational restructures so that the U.S. parent is replaced by a foreign parent.” As a result, the corporation no longer has a U.S. corporate residence and can avoid the 35% U.S. corporate tax, which is currently the highest in the world. Additionally, the corporation pays no tax on its foreign source income to its new foreign country. The Joint Committee on Taxation has estimated that over the course of 10 years, corporate inversions cost the U.S. $20 billion in lost revenue. Between 2004 and 2014, estimates indicate that over 47 U.S. companies have inverted.