Daily Tax Update - January 16, 2014: Swiss Referendum on FATCA Expected to Fall Short

Swiss Referendum on FATCA Expected to Fall Short:  Bloomberg BNA reports that the “Stop FATCA!” campaign organized by the Ligue Vaudoise political party in the Swiss Canton of Vaud will fall short of the 50,000 signatures needed to stop the Swiss-US Intergovernmental Agreement on FATCA from coming into effect on July 1 of this year. The deadline for obtaining the requisite number of signatures was today, January 16.

IRS Issues Temporary and Proposed Regulations on Calculating Foreign Stock Ownership to Prevent Non-Recognition of Inversion Gain:  The IRS today issued temporary and proposed regulations that would disregard some stock in an acquiring foreign corporation for purposes of calculating ownership under I.R.C. Section 7874, consistent with earlier guidance issued under Notice 2009-78. The ownership test is used to determine whether the foreign corporation is a “surrogate foreign corporation” causing an acquired domestic corporation or partnership to be considered an “expatriated entity” that must recognize inversion gain. One condition for an acquiring foreign corporation to be a “surrogate foreign corporation’ is that after the acquisition the shareholders of the acquired domestic corporation own at least 60% of the stock of the acquiring corporation by reason of holding stock in the domestic corporation. Section 7874(c)(2)(B) includes a statutory public offering rule that prevents artificial dilution of the target shareholders’ interest in the acquiring corporation by disregarding any stock of the acquiring corporation that is sold in a public offering. The temporary and proposed regulations expand this exclusion rule to prevent dilutions in ownership caused by the issuance of stock in the acquiring corporation in exchange for cash or other assets.

Comments and hearing requests are due by April 17.   

The temporary and proposed regulations can be accessed here.