Five US senators have urged the IRS to take action to stop MNEs from establishing holding partnership structures to avoid paying taxes on recognized gain in an inversion, like the partnership structure used in the Burger King and Tim Hortons merger.
“Clearly, the sole purpose of this special purpose, pass-through limited partnership structure is US tax avoidance,” wrote Sen. Carl Levin, D-Mich., Sen. Jack Reed, D-R.I., Sen. Mazie Hirono, D-Hawaii, Sen. Tammy Baldwin, D-Wis., and Sen. Dick Durbin, D-Ill in a December 19 letter to the IRS.
In addition, the IRS and Treasury should to take action to discourage the practice of ‘earnings stripping’ and should expand the prohibition of ‘hopscotch loans,’ to all foreign entities with a US subsidiary regardless of whether the entities’ foreign status is the result of an inversion or not, the senators wrote. See, letter.
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