2015 continues to bring attention to corporate inversions, which dominated headlines last year. January saw the reintroduction of the Stop Corporate Inversions Act (H.R. 415) in the House by Sander Levin and Lloyd Doggett, while a companion bill was cosponsored in the Senate by Dick Durbin and Jack Reed. The House bill seeks to modify the definition of inverted domestic corporations under section 7874, defining them as any entity that:
- acquires, after May 8, 2014, substantially all of the properties of a US corporation or assets of a US partnership;
- after the acquisition, more than 50 percent of the stock is held by former shareholders of the US corporation, or the management and control of the expanded affiliated group, including the US entity, occurs primarily in the US and the expanded affiliate group has significant US business activities; and
- does not have substantial business activities in the foreign jurisdiction where the US entity is relocating.
In addition, the revised Levin and Doggett bill sets a new threshold for an expanded affiliate group to be treated as a US corporation. More specifically, aside from the substantial activities of the executive officers and senior management, the proposal defines significant domestic business activities by analyzing whether 25 percent or more of employees, sales, income, or assets are derived in the US. In some respects, the bill seems slightly more aggressive than Notice 2014-52 in its effort of tackling the inversion phenomenon.
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