Willard Taylor Comments on Eric Solomon's Article on Corporate Inversions

October 2012

Mr. Taylor wrote a letter to the editor of Tax Notes Today commenting on Eric Solomon’s article, “Corporate Inversions: A Symptom of Larger Tax System Problems.” Mr. Solomon, co-leader of National Tax Services and the Americas Tax Center for Ernst & Young, provided a concise history of inversions, or expatriations, of U.S. corporations. Mr. Taylor noted that Solomon did not focus on the extent to which inversions are driven by the elimination of U.S. tax on U.S. income and are not only about opting into foreign tax systems, which eliminates U.S. tax on foreign business income. Mr. Taylor explained in the letter, “If foreign tax is not a financial statement cost to an inverting corporation, because of the reinvestment rules in APB 123, the immediate financial statement benefit of inverting is precisely this – the reduction in U.S. tax on U.S. income.” Mr. Taylor underscores this point because it shifts the focus from whether the United States should have an exemption system and also argues for a reexamination of the rules on foreign investment in the United States.