Cathy Hwang

The New Corporate Migration: Tax Diversion Through Inversion

Brooklyn Law Review

UVA Law Faculty Affiliations


In a corporate inversion, a U.S.-incorporated taxpayer renounces its status as a U.S. corporation and becomes incorporated, for tax purposes, in a tax-friendly foreign jurisdiction. The recent surge in inversions is not a new phenomenon, and constitutes the fourth generation of these transactions. Inversions are hugely controversial: critics complain of their effects on the federal deficit, government officials accuse inverters of being unpatriotic, and proposals abound for staunching these transactions.

To this point, however, the debate has failed to focus on the negative collateral consequences of inversions. These transactions warp tax policy by favoring larger corporations and corporations in certain industries. Inversions can also distort corporate decision-making by, for example, causing corporations to incorporate in jurisdictions where managers and shareholders are less familiar with local law and with local social, economic, and political factors. These distortionary impacts provide further cause for concern over inversion transactions, and should play a more central role in the ongoing policy debate.


Cathy Hwang, The New Corporate Migration: Tax Diversion Through Inversion, 80 Brooklyn Law Review 807-856 (2015).

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