This bill tightens tax rules to prevent large U.S. companies from avoiding taxes by relocating their legal headquarters to foreign countries—a practice known as corporate inversion. The legislation lowers the threshold for treating inverted corporations as domestic U.S. entities subject to U.S. taxes, changing a key test from 60 percent to 80 percent ownership by former U.S. shareholders. It also creates a new category called "inverted domestic corporations" that includes foreign companies that acquire substantially all assets of U.S. corporations or partnerships but remain primarily managed and controlled in the United States or maintain significant U.S. business operations (at least 25 percent of employees, compensation, assets, or income). The bill includes an exception for companies with substantial business operations in their country of organization and applies these rules to acquisitions occurring after May 8, 2014, with the changes effective for taxable years ending after that same date.
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