On September 29, 2017, the U.S. District Court for the Western District of Texas ruled in favor of the U.S. Chamber of Commerce regarding its claim that a temporary regulation to deter “serial” inversions issued by Treasury in 2016 without notice and comment violated the Administrative Procedure Act. Although the ruling is clearly an important administrative development for taxpayers considering challenges to IRS regulations, its impact on companies considering inversions is likely more limited. In this regard, the recent Tax Reform Framework indicated it would level the playing field for U.S. and non U.S. companies, including by enacting new rules to deter earning stripping by non-U.S. corporations, a significant benefit that motivated many inversions. Treasury also announced that, pending tax reform, it will retain the key operative provisions under the recent section 385 regulations that deter earning stripping through the use of related party debt.
In next quarter’s podcast, Tax Controversy partner Kat Gregor, Tax partner David Saltzman and senior attorney Gabby Hirz will discuss the importance of the ruling for the regulatory process, situate it among other potential legal changes to regulations, and comment on the government’s much anticipated decision whether to appeal the ruling.
The podcast will appear on the Ropes & Gray’s podcast channel. You can subscribe to the podcast now on the iPhone Podcast app or on iTunes.