On April 4, 2016, the IRS and Treasury released two sets of proposed and temporary regulations that caused various taxpayers, investment bankers and large sectors of the investment community, particularly in the pharmaceutical and biomed sectors, to sound alarm bells. Taxand USA discovers more.
Much of the consternation was focused on the first set, aimed at curbing inversion transactions, and given that Pfizer pulled the plug on its Allergan deal two days after the anti-inversion proposed regulations were announced, the IRS and Treasury clearly hit their intended mark.
While there is much to discuss regarding the new anti-inversion proposed regulations, the second set of proposed regulations issued on April 4 arguably has a much greater impact on corporate taxpayers across industry sectors as well as on private equity investors and thus merit time and attention.
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The proposed regulations under Section 385 are complicated, impose onerous documentation requirements on many taxpayers and, without proper planning, will create many road hazards and traps for the unwary.
