Treasury and IRS issue new rules discouraging U.S. companies from moving abroad for tax savings

The Treasury Department and the Internal Revenue Service have issued new rules to discourage American companies from moving their headquarters abroad to lower their tax rates. The new rules make that more difficult by curtailing companies’ ability to avoid United States tax rates in  locations where they lack substantial business activity.

American companies have been  reduce their tax liabilities through  corporate inversion — purchasing smaller foreign competitors  to move their headquarters to countries with more favorable tax rates than the United States.

Treasury Secretary Jacob J. Lew has called on Congress to act on inversions. Substantive and long term changes will have to come from Congress in the form of legislation.

There have been many companies that have moved their operations for tax reasons and many are being planned in the near future. Coca-Cola Enterprises, a bottler and distributor based in Atlanta, plans to combine with two European Coke bottlers to form a new British-based company. Also, CF Industries, an Illinois-based fertilizer company, is forming a new British company with a Dutch company.