The Treasury Department and the Internal Revenue Service have issued additional guidance about so-called “inversion” transactions. Generally, an inversion transaction results where a U.S. corporation (“U.S. Target”) is acquired by a non-U.S. corporation (“Non-U.S. Acquirer”), but with the U.S. Target’s historic shareholders continuing as significant equityholders of the Non-U.S. Acquirer after closing. The U.S. federal income tax consequences of inversion transactions vary based on a number of factors, including the extent of the U.S. Target shareholder’s continuing equity stake, but in the broadest possible sense, an inversion can have the result of reducing the U.S. Target’s gross income subject to U.S. corporate tax post-inversion. These transactions are not new – a number of statutory provisions have been enacted by the U.S. Congress (notably, Sections 367 and 7874), and various regulatory projects and other administrative guidance have been issued by the Treasury Department and I.R.S. to address these transactions since the early 1990s. However, notwithstanding the government’s efforts, inversion transactions continue.

The latest round of guidance is Notice 2015-79 (the “2015 Notice,” issued November 20, 2015), expanding on the inversion guidance in Notice 2014-52 (the “2014 Notice”). The principal purpose of the 2015 Notice, like the 2014 Notice, is the announcement of future proposed regulations broadly intended both to make inversions harder to accomplish in a tax-preferred manner and to restrict the benefits of certain U.S. post-inversion structuring transactions. These future proposed regulations will have effective dates that are designed to foreclose immediately, as a practical matter, the future use of the structures and techniques described.