Tags: schumer | inversion | tax | 1994

Schumer Draft Tax Plan Against Inversions Could Reach to 1994

Sunday, 07 Sep 2014 02:16 PM

A proposal from a top Senate Democrat could limit deductions for companies that moved their tax addresses out of the U.S. as long ago as 1994, according to a draft obtained by Bloomberg News.

The legislative proposal, which faces high hurdles in a deadlocked Congress, may become part of Democrats’ attempts to penalize companies that cut their tax bills with cross-border mergers known as inversions and get added to their political strategy to blame Republicans.

The draft proposal would apply future interest-deduction limits to companies that moved by purchasing a smaller foreign business after April 17, 1994. The proposal isn’t final and is subject to change, said an aide to Senator Charles Schumer of New York who spoke on condition of anonymity to discuss pending legislation. Schumer, the No. 3 leader in the chamber’s Democratic majority, hasn’t decided when he will introduce it, the aide said.

Several U.S.-based companies, including Medtronic Inc. and AbbVie Inc., have pending deals that would let them cut their corporate tax rates by moving their tax home outside the country, even though executives and operations wouldn’t necessarily follow.

Schumer’s bill addresses the practice known as earnings stripping, the post-inversion steps that companies take to reduce U.S. taxes on U.S. income, often by loading up interest deductions in the U.S.

A 2007 Treasury Department study found that inverted companies engage in earnings stripping, even amid mixed evidence that foreign-owned companies as a whole engage in the practice.

Lower Deductions

The draft details a proposal that Schumer outlined last month. It would reduce the amount of deductible interest for inverted companies to 25 percent of U.S. taxable income from 50 percent.

It also would require such companies to obtain approval from the Internal Revenue Service for transactions between different parts of the same company for 10 years.

Schumer also proposes restrictions on companies’ ability to carry deductions forward to future years.

Among the trickiest parts of writing the legislation is defining the list of companies to which the tougher rules would apply, so that it is targeted toward inverted companies without affecting others.

Because of the deadlock in Congress, the administration is considering executive actions that would make inversions less attractive. Treasury Secretary Jacob J. Lew will speak tomorrow on the matter, though he isn’t expected to announce a specific plan.

Republicans have resisted a quick crackdown on inversions, arguing a broader revamp of the tax code should take priority.


© Copyright 2017 Bloomberg News. All rights reserved.

   
1Like our page
2Share
Newsfront
A proposal from a top Senate Democrat could limit deductions for companies that moved their tax addresses out of the U.S. as long ago as 1994, according to a draft obtained by Bloomberg News.The legislative proposal, which faces high hurdles in a deadlocked Congress, may...
schumer, inversion, tax, 1994
403
2014-16-07
Sunday, 07 Sep 2014 02:16 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
America's News Page
© Newsmax Media, Inc.
All Rights Reserved