Pfizer is taking Johnson & Johnson to court. Photo: Mark Lennihan / AP
A Texas district court on Friday struck down an Obama-era Treasury Department rule that restricted corporate inversions, and the Trump-era Treasury Department is mum on its next moves.
Why it matters: Corporate inversions involve U.S. companies moving overseas for tax purposes, without necessarily moving either their top executives or employee base. The issue came to a head when New York-based Pfizer tried to invert in a $160 billion deal with "Ireland-based" Allergan, which was ultimately scuttled by regulations that the Texas court just struck down.
- From the bench: The rules established in April 2016 by the Obama Administration were challenged by the U.S. Chamber of Commerce and the Texas Association of Business. Not so much on the substance, but rather on the process. And a judge agreed, saying the changes were substantive enough to require both public notice and comment before being implemented (two things that didn't happen).
- Now what? One would think Treasury either would be working on an appeal or prepping that public notice period, or both. After all, Trump constantly complains about U.S. companies moving overseas. But so far there has been no reaction at all, and my emails to a Treasury spox on the matter have gone unanswered. It's possible that the silence is tied into tax reform, with the thinking that a 20% corporate rate will eliminate inversion interest — even though 20% remains well above the statutory rate in a country like Ireland.
- Go deeper: Fortune Magazine's July 2014 cover story by Allan Sloan was about inversions, which Sloan concluded were "positively un-American tax dodges." He would later be called by Congress to testify on the matter.