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Crackdown on tax inversions blamed for killing Pfizer/Allergan merger

Joe Mont | April 6, 2016

The Treasury Department and Internal Revenue Service have issued temporary and proposed regulations intended to limit the use of corporate tax inversions by limiting the benefits that make them appealing for companies.

A corporate inversion is a transaction in which a U.S.-based multinational company changes its tax residence to reduce or avoid paying U.S. taxes. For example, a U.S.-based entity will acquire a smaller foreign company and then locate the tax residence of the merged group in that low-tax country. Critics protest that the primary purpose of inversions is not to grow the underlying business or maximize synergies, but to reduce taxes, often substantially.

In September 2014 and November 2015, the Treasury Department announced guidance that made it more difficult for companies to undertake an inversion and reduced the economic benefits of doing so. On April 4, in a move that took many in corporate America by surprise, it took another swing at the practice...

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