Due to new rules by the U.S. Treasury Department, it is becoming more difficult for U.S. companies to pursue overseas mergers to obtain a foreign address for tax benefits, though relatively small M&A deals have recently proven fly under the radar.
A benefit of inversions that the Treasury has yet to address is the ability of a U.S. subsidiary of an inverted company to deduct interest paid to its non-U.S. parent.
"It's going to be difficult for the Treasury to do much without action by Congress because the technique is hardwired into the tax code,” said partner William Dantzler. "It's also used by overseas firms with big U.S. operations," he continued.
"Inversions made sense last year for multiple reasons and the Treasury only killed one of those reasons, which was accessing trapped cash," said Dantzler. "All the other reasons still exist."