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September 4, 2014

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Treasury Officials Arm Themselves for Inversion Battle

Treasury Department officials are preparing an arsenal of administrative weapons for Secretary Jacob Lew to use in the government’s battle to prevent U.S. companies from reincorporating overseas in an effort to avoid paying federal taxes, otherwise known as tax inversion.

Inversion, while complex, became popular because of its ability to allow a U.S. company to transfer its headquarters overseas to a nation with low corporate taxes, essentially dodging the egregiously high 35% corporate tax rate in the United States.

While Treasury officials are still working through ideas, recent comments on the matter made by President Barack Obama appear to have spurred the agency to action. Changes are expected as early as September.

Although the two parties agree something needs to be done in regards to inversion, they can’t seem to agree on how to proceed. Democrats suggest lawmakers should pass a stopgap measure to discourage companies from pursuing the deals, while Republicans believe an overhaul of the tax code is the best course of action.

After several weeks of waiting and patience wearing thin, the White House announced it would consider taking steps of its own.

Although the government’s plans are unknown, one thing is certain – businesses, lawyers and tax advisers will be watching closely.

Source: Paletta, Damian, “Treasury Officials Prepare Options to Address Inversions,” The Wall Street Journal, August 18th, 2014

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