Congress should immediately change the law to stop companies from avoiding U.S. taxes through inversion transactions, Treasury Secretary Jacob J. Lew said.
Any change should be retroactive to May 2014, Lew wrote in a letter to lawmakers, which is dated today and was obtained by Bloomberg News.
“We should prevent companies from effectively renouncing their citizenship to get out of paying taxes,” Lew wrote.
The pace of inversion deals has escalated in recent months, as companies such as Medtronic Inc. (MDT) and Mylan Inc. (MYL) have announced transactions that let them move their legal address outside the U.S.
In inversions, U.S.-based companies purchase a foreign company, then switch the legal address to take advantage of the foreign jurisdiction’s favorable tax rules.
Lew’s letter escalates the administration’s involvement in the issue. Congress, so far, has shown little willingness to rush to approve legislation.
The Obama administration has proposed making it effectively impossible for a U.S.-based company to purchase a smaller foreign competitor and take that other company’s address.
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