IRS Rules Fail to Curb Expatriation, Administration Tries Indifference

Corporate expatriations – transactions that lead a U.S. company to become the subsidiary of a foreign parent – present two problems for the U.S. Internal Revenue Service (I.R.S.). First, they give expatriated companies the opportunity to use tax minimization strategies to avoid taxes; second, they erode the U.S. corporate tax base. Though both actions are driven by idiosyncrasies in U.S. tax treatment of foreign income, they spring from different motivations, and lead to different kinds of harm. Tax minimization involves exploiting differences in national tax laws to shield income from arguably legitimate U.S. tax obligations, while tax base erosion involves … Read more

Thomson Reuters Survey Finds New Structures, but no Decline in Inversions

The pending mergers of Johnson Controls, Inc. with Tyco International plc and Pfizer Inc. with Allergan plc means the value of inversions in the pipeline ($185B) has nearly reached the total value of all inversions completed between January 1, 2010 and September 24, 2014 ($197B) – the day the Internal Revenue Service (IRS) released its first passel of rules aimed at curbing inversions (Rules Regarding Inversions and Related Transactions, Notice 2014-52, 2014-42 I.R.B. 712 (2014), Anti-Inversion Rules, AIR1). Our fortuitously timed survey comparing inversion activity before and after AIR1 found that while IRS rules appear to have inspired … Read more

Survey of Fee-Shifting Bylaws Suggests DGCL Amendments Won’t End Debate

On November 3, 2014, the board of directors of Cogent Communications Holdings, Inc., a publicly traded internet-service provider incorporated in Delaware, amended Cogent’s bylaws to include two new provisions. One was a forum-selection provision designating Delaware as the exclusive forum for derivative actions and other claims involving internal corporate matters. The other was a so-called “fee-shifting” bylaw requiring any stockholder who asserts “any claim … against the Corporation and/or any director, officer, [or] employee” and does not obtain a judgment on the merits that “substantially achieves… the full remedy sought” to reimburse any costs the corporation incurred defending the suit … Read more