National Security Implications of Corporate Inversion: FOCI, CFIUS, and Export Controls
Summary: There has been much recent focus on cross-border transactions in which U.S. companies re-domicile their corporate headquarters outside of the United States. The practice, known as “corporate inversion,” may allow the inverted domestic corporations to reduce U.S. taxes on overseas income. Practitioners and U.S. government officials acknowledge that a corporate inversion, whereby a U.S corporation is acquired by a foreign corporation or merges into a foreign corporation with the foreign corporation surviving, may create legally available tax benefits in part through the lower income tax rates of the foreign jurisdiction. The U.S. Department of the Treasury and U.S. Congress, however, are closely scrutinizing the practice, which has generated extensive recent political debate. To ensure regulatory compliance, U.S. companies contemplating a corporate inversion should be aware of potential national-security regulatory implications regarding foreign ownership, control or influence (“FOCI”), the Committee on Foreign Investment in the United States (“CFIUS”), and export controls.
This client alert was prepared in collaboration with Deloitte.