Menu
Law360 Quotes David Rosenbloom on TCJA and Inversions
Caplin & Drysdale

Law360 Quotes David Rosenbloom on TCJA and Inversions

Date: 4/16/2018

Despite the business-friendly tone of the U.S. tax overhaul, specialists say the new law’s treatment of offshore earnings could still push some companies to move their headquarters overseas if they can make it over the rising hurdles against inversions.

. . .

David Rosenbloom, a professor at the New York University School of Law and a member of Caplin & Drysdale's Washington office, said that most inverters don’t actually leave the U.S., so there would still be a tax on U.S. operations.

“But you’d be out of Subpart F, and since you would be out of CFC status, you’d also be out of GILTI, so that’s a benefit,” he said.

While there are other motivations to move abroad, such as a rate that’s lower than 21 percent, the real benefit of inverting is to reduce the U.S. tax base, Rosenbloom said. He added that companies still could pull that off if they can get around the BEAT.

The BEAT, touted by the law's authors as a crucial protection against base-stripping by foreign companies, limits deductions on payments by a U.S. corporate entity to related parties abroad, ensuring it doesn't reduce its U.S. taxable income to less than 10 percent.

. . .

However, Rosenbloom pointed out that there are some companies that won’t be subject to the BEAT. For example, the provision only applies to corporations making more than $500 million or to transactions found to be “base erosion payments,” including rent, royalties and interest.

“If you can avoid the BEAT all together, I don’t see why you wouldn’t have an incentive to invert,” he said.

. . .

In the meantime, Rosenbloom said, although Congress passed a major tax overhaul, no one knows how long it will last or what will happen if the powers change on Capitol Hill.

“Looking at the rules as they stand, companies considering a big-ticket change like an inversion are going to be deterred by the fact that the situation is quite unclear,” he said, noting that inversions have affects over multiple years. “I think companies will not rush into something in such an uncertain situation.”

For the full article, please visit Law360’s website (subscription required).

Excerpt taken from the article “TCJA Limits Means For Inversions, But Incentives Remain” by Natalie Olivo for Law360.

Related Professionals

Related Practicen Area(s)

View our non-mobile site Menu