Beyond Territoriality and Deferral: The Promise of 'Managed and Controlled'

5 Pages Posted: 12 Aug 2011 Last revised: 25 Aug 2011

Date Written: August 12, 2011


In the new version of his Stop Tax Haven Abuse Act, Senator Carl Levin (D-Mich) once again proposed to modify the definition of residence for domestic corporations to treat companies "whose management and control occur primarily in the United States as U.S. domestic corporations for income tax purposes.” Adopting this proposal would further deter inversions, and would make it difficult for U.S.-based hedge funds and nonprofits to use “blockers” to avoid effectively connected income and UBTI without actually operating the blockers offshore. These are significant improvements over the current system. But the biggest impact will be on Subpart F. The debate between opponents and proponents of deferral and territoriality seems unlikely to produce real reform anytime soon. But if we adopted “managed and controlled”, it would become much more difficult for U.S. multinationals to avoid Subpart F merely by creating shell companies overseas and using one of the myriad loopholes in the existing rules.

Keywords: Managed and Controlled, deferral, Subpart F

JEL Classification: H25

Suggested Citation

Avi-Yonah, Reuven S., Beyond Territoriality and Deferral: The Promise of 'Managed and Controlled' (August 12, 2011). U of Michigan Public Law Working Paper No. 248, Available at SSRN: or

Reuven S. Avi-Yonah (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4033 (Phone)

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