One of the largest pharmaceutical companies in the world, Pfizer Inc., is trying to be come the largest US firm to ever use an inversion to lower its corporate taxes. Pfizer is trying to acquire Dublin, Ireland-based Allergan PLC for perhaps as much as $140 billion. The US Treasury department is actively trying to implement rules to discourage if not prohibit inversions, as US companies seek to avoid the high 39 percent corporate tax rate in America. The Pfizer-Allergan deal, if completed, will be by far the largest merger/acquisition in 2015 – the busiest year ever for corporation combinations. US law as of 11-20-15 allows inversions as long as the US firm’s shareholders own less than 80 percent of the combined company. Democrats favor a ban on inversions but Republications favor an overhaul of the US tax system instead of a bad on inversions. In addition to the giant Pfizer-Allegan inversion pending, another one pending is the CF Industries Holdings purchase of Dutch fertilizer rival OCI NV. From a tax (cash flow) perspective, an inversion may be the best strategy, but be mindful that whenever an individual changes his/her citizenship, or a firm changes its home country, that person or firm gives up its US legal protections and rights in favor of the host country’s.

Source: Based on Richard Rubin, Jonathan Rockoff, and Dana Cimilluca, “Pfizer Heads For Fight on Tax-Saving Foreign Deal,” Wall Street Journal, November 20, 2015, A1 & A12.