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New Tax Law Haunts Companies That Did 'Inversion' Deals

"The new tax law has something in store for some 'inverted' companies that inked mergers overseas and lowered their U.S. taxes: higher taxes," reports the Wall Street Journal (Feb. 11, Rockoff, Trentmann). Companies that engineered so-called inversion deals in recent years had reduced their tax rates and were eligible for certain deductions by shifting their tax homes to other countries. Provisions in the new law restrict some of those deductions, though, most notably the interest payments U.S. subsidiaries pay on loans from overseas parents. Several inverted companies, among them Johnson Controls International and Eaton Corp., have begun announcing in recent days that the law will indeed raise their effective tax rates. Dozens of U.S.-based companies, including Mylan NV and Burger King Worldwide (now Restaurant Brands International Inc.), did inversions in recent years by purchasing foreign rivals in lower-tax countries like Ireland and Luxembourg.

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