Crackdown On Tax Inversions May Lead To Fewer Spin Offs

Lexology has a nice overview of tax inversions and the government response to them.  Of particular note to us was one practice Treasury has sought to end, known as “spinversions”:

No Spinversions.  The U.S. entity would not be allowed to transfer its assets to its current foreign subsidiaries and then spin off those subsidiaries to its public shareholders as separate corporate entities.  These new entities are smaller and more likely to be able to merge with a new foreign parent and meet the 80 percent threshold.  Treasury proposes taxing these new companies and as U.S. companies.

We have definitely seen a fair number of spinversion transactions of late and these are likely to disappear from the landscape going forward.  Despite this, the number of newly announced spin offs seems to continue rising as the trend towards deconsolidation continues.