US Chamber of Commerce sues gov't over tax inversion regulations

The US Chamber of Commerce and the Texas Association of Business have filed a legal challenge to the Internal Revenue Service’s immediately effective Multiple Acquisition Rule, which attempts to prevent certain corporate mergers that are otherwise permitted under the inversion rules under Section 7874 of the Internal Revenue Code.

The new corporate tax inversion rules likely impact on mergers and acquisitions saw a major (and some smaller) M&A deals in the pharmaceutical industry abandoned, notably Pfizer’s (NYSE: PFE) $160 billion proposal to buy Allergan (NYSE: AGN) and even ahead of implementation had an effect on Pfizer’s failed attempt on AstraZeneca (LSE: AZN). Also impacted was AbbVie’s (NYSE: ABV) bid for Shire (LSE: SHP). Deals outside the pharma sector were also affected.

The administration asked Congress to give it the authority to eliminate corporate inversions. When Congress would not do so, Treasury and the IRS ignored the clear limits of the tax code to target entirely lawful transactions.