US Treasury challenges GOP with tax rule preventing overseas corporate mergers
As a federal court case surrounding the “serial inverter” rule continues, “Treasury continues to work to finalize these regulations,” a US Treasury spokeswoman told Reuters on Monday.
The regulation was first issued by the Treasury in April as a temporary measure, as Congress had been in gridlocked on the matter. It notoriously hindered what would have been the largest tax inversion merger ever, between Allergan Plc, an Ireland company, and Pfizer, a US drug manufacturer.
US companies can avoid US taxes on their foreign earnings or US corporate taxes, which are the highest in the world, by merging with non-US companies and relocating, even if only on paper, to another country. The “serial inverter” aims to prevent that scenario by removing tax-relieving procedures once an inversion is made.
While the Treasury expects to finalize the rule, making it permanent, by the end of the year, Republicans have a majority in both chambers of Congress and a President Donald Trump to lead them in reversing that move. It remains to be seen whether that will be a priority of either the Congress or the White House, but House Majority Leader Kevin McCarthy (R-California) urged federal agencies to quit adding regulations without congressional approval earlier this year, and House Republicans specifically requested the Treasury not proceed on the “serial inverter” rule, Reuters reported.