Tax

Pfizer and Allergan to Merge in $160 Billion Deal

By Vartika Jain, LL.M. Candidate 2016 | Posted on

On November 23, 2015, pharmaceutical giant Pfizer, Inc. announced a $160 billion merger deal with Allergan Plc that will create the world’s largest drug maker by sales, keeping pace with the unprecedented surge in healthcare mergers and acquisitions in 2015.

The combined entity will be renamed Pfizer Plc and its headquarters will be in Ireland, where the corporate tax rate is 12.5 percent, compared to 35 percent for a comparably sized company in the U.S. Post-merger, Pfizer shareholders are expected to own about 56 percent of the combined company, with the remaining 44 percent owned by Allergan shareholders. Expected to close in the latter half of 2016, the transaction is subject to certain closing conditions, including receipt of regulatory approvals in the U.S. and the European Union and the receipt of Pfizer and Allergan shareholders’ votes.

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Tax Bill Threatens the Dell-EMC Merger

By Aicha Ahardane, LL.M. Candidate 2016 | Posted on

Last October, Dell offered to buy EMC for $67 billion, making it the largest tech merger ever. This merger will create a new technology giant that will sell both consumer and IT products, ranging from personal computers to data storage gear for corporate data centers.

To finance this acquisition, Dell will use a combination of borrowed cash up to $49.5 billion and tracking stocks in an EMC subsidiary called VMware. The offer valued EMCat $33.15 a share, for which Dell will pay $24.05 in cash per share and give EMC shareholders a special stock that tracks the share price in VMware. Intended to offset the amount of debt Dell will take on, those tracking stocks seriously threaten the feasibility of the deal because of a possible $9 billion tax bill.

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Treasury Releases New Guidance on Inversions

By Vinh-Khoi Le, J.D. Candidate 2016 | Posted on

On Thursday, November 19, 2015, the Treasury Department issued a second notice designed to limit the tax benefits of overseas tax-inversion deals. This notice is a continuation of the US government’s recent anti-inversion actions, including the notice that the Treasury Department issued on September 22, 2014.

“Last year, Treasury took targeted action to address inversions,” said Treasury Secretary Jacob J. Lew. “This notice made a real difference by reducing some of the economic benefits of inversions, resulting in a decline in the pace of these transactions. This next action makes it even harder to invert, and further reduces the tax benefits for U.S. companies. While we intend to take additional action in the coming months, there is only so much the Treasury Department can do to prevent these tax-avoidance transactions. Only legislation can decisively stop inversions. The Administration has been working with Congress in an effort to reform our business tax system and address the issue of corporate inversions‎.”

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U.S. Proposes to Cut Back on Solar Installation Tax Credits by 2017

By Kristofer Hatch, J.D. Candidate 2017 | Posted on

By the end of next year, the U.S. will cut back on tax credits for wind and solar.  Solar power’s most prominent tax credit will expire at the end of 2016, with the most significant tax credit for wind power having already expired.

Currently, federal subsidies provide residential solar installers with a thirty percent tax credit through the solar investment tax credit (ITC).  The ITC has been extended in the past, and has helped solar installation grow by over 1600% since its inception in 2006.  At the end of 2016, this subsidy will be reduced down to ten percent.

These cutbacks on credits for solar energy could have steep consequences on the solar industry in the United States.  Elon Musk has blamed the closing of Zep Solar UK, a subsidiary of his US-based parent company, Solar City, on cuts to solar subsidies in the UK.  Other markets however, have managed quite well, despite a lack of tax credits.  Solar energy in Chile, for example, has fared much better without governmental support: total installed solar capacity increased from less than 4 Megawatts to more than 220 Megawatts in a year, without the support of subsidies.

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Pfizer Contemplates Benefits Of Becoming Behemoth For Tax Purposes

By David Gomez, J.D. Candidate 2018 | Posted on

Pfizer has recently engaged in talks to purchase Allergen. This deal would be the one of the largest in a year of large deals—Pfizer and Allergen combined would amount to over a $330 billion market valuation. In the proposed scenario, these two large pharmaceutical companies would combine for the purposes of an inversion deal.

An inversion deal is a transaction used by a company where it becomes a subsidiary of a new parent company in a different country for the purpose of falling under more beneficial tax laws than it had in its previously domiciled country. In this case, Pfizer would like to pay the lower taxes in Ireland, where Allergen is currently domiciled, instead of the tax rate of the United States where it is currently domiciled.

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Recap: “The Scott Carey Speaker Series—The Real Estate Lawyer”

By Patrick Atchison, J.D. Candidate 2018 | Posted on

On October 29, 2015, the Berkeley Business Law Journal and the UC Berkeley Department of City & Regional Planning welcomed Leo Pircher ’57, a founding partner at Pircher, Nichols & Meeks, for a Q&A discussion about his career as an industry leading real estate attorney and changing dynamics in real estate law.

A graduate of UC Berkeley ‘54 and UC Berkeley School of Law ‘57, Mr. Pircher began his legal career working in a variety of practice areas including tort litigation, wills & estates, and tax.  After several years of firm work, Mr. Pircher joined J&B Reedly Corporation, which at the time was the largest private equity real estate company in the nation. As corporate counsel, Pircher innovated real-estate tax structures and legal techniques for real estate transactions that remain industry standards to this day.

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BEPS Provides Guidance on Definition of CFCs

By Vinh-Khoi Le, J.D. Candidate 2016 | Posted on

The Organization for Economic Co-operation and Development (OECD) released the final report of Base Erosion and Profit Shifting (BEPS) on October 5, 2015. The report seeks to make a more uniform global legal system to recover deferred tax revenues from multinational corporations who engage in aggressive international tax planning.

Because the report is not self-executing, individual countries must modify their own tax rules to implement BEPS-suggested changes. While the OECD intended to create a coordinated set of rules, the rules may have the opposite effect. As some countries will likely adopt the suggestions more swiftly than others, the rules may create an even more complex global tax system.

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Corporations are People…Except in the Tax World: Study Finds U.S. Corporations Stockpile $2.1 Trillion Overseas

By Sheila Salehpour, J.D. Candidate 2018 | Posted on

Ever since Citizens United, the infamous notion that “corporations are people” has been a point of controversy and aversion among the American public. While the landmark case entreated corporations with the same rights as individuals in the context of political spending, such a mentality remains to be seen in the tax world, where a recent study found that $2.1 trillion in profits is being harbored in overseas tax havens by U.S. companies.

Citizens for Tax Justice, the non-profit group responsible for the study, reported that General Electric remains at the top of the list for the fifth year in a row with $119 billion overseas. Among others, technology companies such as Apple, Google, and Microsoft maintain more than one fifth of the $2.1 trillion overseas, a figure that is up 8% from 2014. These funds are generally held in low-tax countries such as Bermuda, Ireland, Luxembourg, and the Netherlands, and profits are stockpiled there in order to evade payment of the repatriation tax upon transfer to the U.S.

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Tax Treatment of Yahoo’s Planned Alibaba Spin-Off Remains Uncertain

By Grace Meador, J.D. Candidate 2016 | Posted on

In a securities filing from September 8, 2015, Yahoo disclosed that the IRS had declined to rule on the tax consequences of their long-planned Alibaba spin-off.

Yahoo announced its intentions to spin off its holdings in Alibaba into a new company, Aabaco Holdings, in January 2015. Yahoo currently owns 384 million shares in Alibaba, which are collectively worth around 23 billion dollars.

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Taxes on Marijuana: A Percentage of Gross Profits or Net Profits?

By Erika K. Solanki, J.D. Candidate 2017 | Posted on

Many pro-legalization advocates and legislators claimed legalizing marijuana would result in massive tax revenues. And while this has proven true, state officials want more.

From June 2014 to June 2015, cannabis sales soared to over $260 million in the state of Washington. State officials claim to have collected over $65 million in first-year taxes from recreational marijuana sales. In Colorado, state officials estimated that it will collect close to $100 million in taxes from the first year of recreational marijuana legalization. However, the state came short, only collecting $44 million in taxes from recreational marijuana sales, largely due to a quirk in the state’s constitution. In addition, despite legalization, some observers are suggesting not all sales are going through legal channels. (more…)