{
  "id": "R44617",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R44617",
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  "source": "EveryCRSReport.com",
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      "source": "EveryCRSReport.com",
      "id": 455619,
      "date": "2016-09-07",
      "retrieved": "2016-11-28T21:39:04.322469",
      "title": "Corporate Inversions: Frequently Asked Legal Questions",
      "summary": "In general, corporate inversions are transactions in which a U.S. corporation \u201cinverts\u201d its ownership structure so that it now has a foreign parent. There are various ways in which this can be achieved. Corporate inversions have been controversial because it appears, in at least some cases, the primary motivation is the reduction of U.S. income tax liability.\nIn 2004, Congress added Section 7874 to the Internal Revenue Code (IRC), which significantly limits the tax benefits associated with corporate inversions. While Section 7874 appeared to slow the rate of inversions in the years immediately after its enactment, there have been reports of numerous high-profile inversions (or plans to invert) in recent years. In light of these reports, some have questioned whether Section 7874 should be amended to further limit the ability of inverted corporations to reduce their U.S. tax liability. Others, meanwhile, have argued that these recent inversions are fundamentally different than those that led Congress to enact Section 7874 because the recent inversions are more likely to have legitimate, non-tax business reasons associated with them. As such, some argue that Section 7874 has effectively shut down the types of inversions motivated solely by tax reasons and that to amend the law would risk affecting legitimate, cross-border mergers.\nThis report answers frequently asked legal questions about corporate inversions. It answers questions relating to the scope and operation of Section 7874, including how key statutory terms have been interpreted by the Internal Revenue Service (IRS). It discusses important Department of Treasury regulations that were finalized in 2015 and 2016, and answers questions about the IRS\u2019s authority to issue these regulations. Other questions that are answered relate to legislation introduced in the 114th Congress, the interaction of Section 7874 with tax treaties, and the imposition of an excise tax on corporate insiders who benefit from an inversion.\nThis report only examines the federal tax consequences of corporate inversions. For a discussion of the federal contracting implications, see CRS Report R43780, Contracting with Inverted Domestic Corporations: Answers to Frequently Asked Questions, by Kate M. Manuel and Erika K. Lunder. For a discussion of the policy issues surrounding inversions, see CRS Report R43568, Corporate Expatriation, Inversions, and Mergers: Tax Issues, by Donald J. Marples and Jane G. Gravelle.",
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