Corporate dealmakers have a new complication to consider starting next year, with the introduction of a minimum tax that's set to affect a type of divestiture that until now has gone untaxed. Some split-offs—where a publicly listed parent company hives off a unit and stockholders then choose whether to own shares in either the parent or the new company—are set to be affected by the new 15 percent corporate "book tax."

Split-offs can generate earnings for the parent on its financial statements, and from 2023 onward, those earnings will be subject to the new 15 percent minimum levy for companies with at least $1 billion of profits reported to shareholders. Financial accounting figures weren't previously used for determining corporate tax liabilities.

"The transaction that you thought was tax-free might be taxable," Jodi J. Schwartz, a partner at law firm Wachtell, Lipton, Rosen & Katz said. "If you had zero taxable income and then you had a split-off, you would still have zero taxable income, but you would have all this book income and be subject to the IRA's [Inflation Reduction Act's] minimum tax," she said.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including and

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.