Sept. 10 — Congressional Republicans appeared sour on a bill that seeks to curb corporate inversions, released by Sens. Charles E. Schumer (D-N.Y.) and Richard J. Durbin (D-Ill.), as the likelihood for a legislative deal in September dimmed further.
Released Sept. 10, the proposal would attack corporate inversion deals, overseas mergers and acquisitions for tax purposes, by denying companies certain deductions after the deal is completed.
The Corporate Inverters Earnings Stripping Reform Act is the latest Democratic effort to curb inversions. In May, Sen. Carl Levin (D-Mich.) and Rep. Sander M. Levin (D-Mich.) introduced the Stop Corporate Inversions Act (S. 2360, H.R. 4679), which would set tougher regulatory requirements for inversion deals, making them nearly impossible.
Also Sept. 10, Treasury Secretary Jacob J. Lew and Mark Mazur, the department's assistant secretary for tax policy, met with House Ways and Means Committee Democrats to discuss the matter. But the meeting was scheduled in advance and the administration officials didn't preview possible executive actions they are contemplating if legislative efforts stall, a committee aide told Bloomberg BNA.
Schumer told Bloomberg BNA that he doesn't expect consideration of his bill until after November's midterm elections, but declined to forecast whether it would move with other legislation scheduled for the lame-duck session, such as tax extenders or the next continuing resolution.
The core of the Schumer-Durbin bill would prevent companies from practicing earnings stripping after an inversion deal is completed. Earnings stripping involves an inverted company's U.S. subsidiary owing debt to its foreign parent. The subsidiary can then deduct interest payments on the money owed.
Meanwhile, Treasury Secretary Jacob J. Lew said the Obama administration can make tax inversions less economically attractive to U.S. corporations and deter companies from changing their addresses.
Lew said a “broken” tax system is what prompts U.S. companies to reduce taxes by moving their addresses abroad. He reiterated Sept. 9 that the administration will decide on possible action in the “very near future” to limit inversions.
“If Congress doesn’t act, we have to take the steps we can, which will reduce the economic value of inversions,” he said in an interview with Bloomberg Television at the Treasury Department in Washington. “It will not take away the need for legislation. But it will take a lot of the value out of these inversions, which I hope will change the decisions companies make.”
Lew’s comments went beyond a speech earlier this month in which he said Treasury is exploring its legal authority to act without Congress. The comments were the strongest yet in which he affirmed Treasury’s authority to limit inversions, which he had played down in July.
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