Sponsor
Lloyd Alton Doggett
Representative · D-TX
Representative · D-TX
Official title: To amend the Internal Revenue Code of 1986 to modify the rules relating to inverted corporations.
Introduced February 11, 2026 by Lloyd Alton Doggett · Last progress February 11, 2026
The bill aims to increase corporate tax receipts and provide clearer rules for post-2014 inversion transactions, but does so at the cost of potential retroactive tax liabilities, expanded IRS discretion, and litigation risk for affected companies.
U.S. taxpayers and federal revenues receive higher corporate tax receipts because more post-2014 inversion transactions can be treated as domestic, reducing opportunities for tax avoidance.
Multinational groups and financial institutions get clearer, more specific standards for determining 'management and control' and 'significant domestic business activities', which reduces ambiguity in tax treatment going forward.
Multinational firms that completed acquisitions after May 8, 2014 could face retroactive tax recharacterization, increasing their tax liabilities, compliance costs, and cashflow uncertainty.
Taxpayers and financial institutions face greater regulatory uncertainty because the bill expands IRS authority to raise thresholds, enabling stricter future tests for the foreign-activity exception.
Companies and the IRS may litigate over the 25% bright-line test for 'significant domestic business activities' (employees, assets, income), producing disputes, administrative burden, and legal costs.
Based on analysis of 2 sections of legislative text.
Tightens the tax-code tests for corporate inversions by defining "inverted domestic corporation" and adding a 25% domestic-activity threshold, effective for taxable years ending after May 8, 2014.
Revises the Internal Revenue Code rules that determine when a foreign transaction is treated as a U.S. corporation inversion. The bill adds a new definition and tests for an "inverted domestic corporation," tightens the surrogate foreign corporation test, and sets a 25% threshold for "significant domestic business activities." These changes apply to taxable years ending after May 8, 2014. The amendment narrows opportunities for U.S. companies to avoid U.S. tax treatment through acquisitions and reorganizations by expanding the circumstances under which an acquiring foreign entity is treated as a domestic corporation. It preserves an existing foreign-business exception but gives Treasury authority to raise regulatory thresholds and applies management-and-control rules for post‑May 8, 2014 transactions.