Blocker Corporations in Mergers and Acquisitions

Summary

This practice note discusses the use of Blocker Corporations in mergers and acquisitions. When tax-exempt or non-U.S. taxpayers invest in U.S. businesses, unwanted and unintended U.S. tax obligations can follow without careful planning. Blocker corporations are utilized to shield or block various tax attributes from automatically flowing through to the ultimate owner or taxpayer and have become very common in transactions made by private equity (PE) funds. While the concept and intended purpose are relatively straightforward, the practice has evolved and is favored in a growing number of transaction types and raises some novel issues about ownership and economic control if there is any difference in ownership.