Wednesday, August 27, 2014

Senator Wyden Will Move Bi-Partisan Corporate Inversion Legislation in September

Senate Finance Committee Chairman Ron Wyden, (D-OR) will have bi-partisan legislation in place to end corporate inversion mergers sometime in September. In a statement, he emphasized the importance of defining key principles now as Congress pushes forward to finally close this loophole.

While an anti-inversion provision has been part of the Internal Revenue Code since 2004, experience has shown that this provision insufficiently deters inversion given the large tax rate and other tax disparities between the United States and the countries to which formerly U.S.-based multinationals have relocated.

Under current law, U.S. companies can invert and avoid paying U.S. income taxes if a merger transfers just 20 percent of its stock to shareholders of an offshore company. One legislative vehicle is available for Congress right now. It is the Stop Corporate Inversions Act, S. 2360, introduced by Senator Carl Levin (D-Mich.). The measure would raise the 20 percent threshold to 50 percent so that if the majority of a company’s stock remains in the hands of the U.S. company’s shareholders, it is treated as a U.S. company for tax purposes. The bill would also bar companies from shifting their tax residence offshore if their management and control and significant business operations remain in the U.S. There is a companion bill in the House, H.R. 4679, introduced by Rep. Sandy Levin (D-MI).

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