Key takeaways

• On April 4, 2016, the Treasury Department and the IRS issued Temporary Regulations intended to curtail tax inversion transactions and to eliminate the benefits of certain post-inversion “tax avoidance” strategies.
• Although the Temporary Regulations generally conform to the rules announced in two prior administrative notices, they also introduce a significant new rule addressing multiple-step acquisitions of U.S. entities, which has resulted in the termination of the Pfizer-Allergan merger.
• In connection with the issuance of the Temporary Regulations, Treasury and the IRS also issued proposed regulations that would place significant limitations on debt issuances by a U.S. entity to the foreign acquiring company in connection with an inversion transaction.
• The Temporary Regulations retain the cash box rule, including the exceptions to the rule, as described in the administrative notices; importantly for the insurance industry, the Temporary Regulations retain the PFIC insurance exception.