Layla Asali was quoted regarding recent Department of Treasury guidance aimed at making inversions more difficult to accomplish and reducing the tax benefit they offer. "The transactions that they are targeting are a significant part of post-inversion planning," Asali said, and the prospective nature of the "wide-ranging package" in Notice 2014-52, which applies the new rules to inversion transactions occurring on or after September 22, was significant. Treasury "could have made it so that going forward companies are subject to this new section 956 rule, for example, but they didn't just do that," she added. Instead, companies that completed an inversion before September 22 are not subject to the section 956 rule. "To the extent they rely on this type of planning, pending deals are hammered," she said.

Asali said that while Treasury was careful to show its steps in claiming its authority to regulate under section 956(e), the approach of the notice was not typical, given how narrowly it tailored its application. "It's a little unusual to say, 'We're regulating under 956, but the rule only applies to inversion transactions.' What's the policy basis for drawing the line at inversions?" she asked. Usually, practitioners think of section 956(e) as applying to the reorganization of a controlled foreign corporation, not a transaction at the parent level, as is the case with an inversion. Additionally, Treasury's claim of regulatory power under section 7701(l) is "a creative use of authority," she said. "Everyone thinks of section 7701(l) as an anti-conduit rule. The notice goes out of its way to say, 'Yes, we know it's an anti-conduit rule, but it's not only an anti-conduit rule.'"

Asali added that one small taxpayer-favorable rule for foreign-parented groups did come out of the notice, under the rule regarding subsequent transfers, or "spinversions." By providing an exception for foreign-parented groups, the notice addresses internal restructurings that may have otherwise caused taxpayers concern about inadvertent inversions.