New regulations expand prior guidance reducing tax benefits of inversions. Proposed debt-equity rules will impact even routine intercompany transactions.

On April 4, 2016, the US Department of the Treasury (Treasury) and the Internal Revenue Service (the IRS) issued new regulations (the Temporary Regulations) aimed at curbing the cross-border corporate expatriation transactions commonly referred to as inversions and the associated tax advantages. Concurrently, Treasury and the IRS issued strikingly broad new proposed regulations limiting the use of related-party debt, which, according to Treasury, taxpayers have used to engage in “earnings stripping” and certain other tax planning techniques the government deems inappropriate. The new rules, particularly with respect to related-party debt, go further than any previous guidance and indeed target a number of relatively common structures multinational business enterprises have utilized over the last decades.