May 20, 2014

Offshore tax deals in the cross hairs

A group of Democratic senators unveiled a bill Tuesday that would limit a corporation's ability to shift its address offshore for tax purposes.

Sen. Carl Levin (D-Mich.), a longtime crusader against tax evasion and avoidance, said the bill would put a two-year moratorium on the practice, known as "inversion."

“It will be very, very difficult if this bill is passed for companies to invert,” Levin told reporters at a news conference.

The measure, co-sponsored by 13 other Democrats and modeled after a proposal from President Obama, would drastically raise the amount of foreign ownership a merged company needs to be treated as foreign for tax purposes.

Currently, a company can avoid U.S. income taxes if a fifth of the stockholders in the merged company were not a part of the U.S. business. Obama and Levin want to bump that figure up to 50 percent.

And even if companies meet that ownership standard, the bill would still treat them as American for tax purposes if the corporation’s management stays in the U.S. or if at least a quarter of its employees, sales or assets remain domestic.

Lawmakers began eyeing those sorts of mergers again after the drug giant Pfizer sought to take over the British pharmaceutical company AstraZeneca.

...

“I’m only sorry that we’re not a bipartisan group standing here today,” said Sen. Sheldon Whitehouse (D-R.I.), one of the bill’s co-sponsors. “But I guess now the Republican passion against taxes has come to the point where they are now willing to allow for and accommodate tax avoidance and tax cheating.”

Sen. Mazie Hirono (D-Hawaii) also pushed back on the idea that legislation should wait for tax reform, echoing Whitehouse’s comments that the tax code is “fundamentally corrupt.” Hirono noted that many corporations already pay far less than the statutory 35 percent corporate rate.

“Waiting for comprehensive tax reform is like waiting for Godot,” said Hirono, another co-sponsor.

Read the entire piece at: http://thehill.com/business-a-lobbying/206642-democrats-target-offshore-tax-deals


By:  Bernie Becker
Source: The Hill