Senator Carl Levin said he will introduce legislation this week to limit U.S. companies’ ability to move their legal addresses out of the country for tax purposes through mergers.
Congress should consider imposing a moratorium on those so-called corporate inversions, Levin said.
He said his bill would alter a rule that sets a minimum foreign-ownership requirement at 20 percent. President Barack Obama has proposed raising that threshold to 50 percent, which would raise $17 billion for the government over the next decade.
“If you are serious about stopping people from changing their address to avoid paying taxes, you’ve got to close that loophole,” said Levin, a Michigan Democrat.
Pfizer Inc. is considering using an inversion transaction to purchase AstraZeneca Plc. The combined company would be managed in the U.S. while its legal tax address would be in the U.K., where the corporate tax rate is lower.
Even beyond taxes, New York-based Pfizer’s proposed takeover has prompted objections from U.S. and U.K. lawmakers concerned about possible job cuts.
At least 14 U.S. companies have completed inversion deals since January 2012 or are considering them, including Eaton Corp. Plc and Chiquita Brands International Inc.
Senate Finance Chairman Ron Wyden, an Oregon Democrat, said last week that he plans to address such corporate inversions and any legislation would be retroactive to May 8.
The proposals from Levin and Wyden stand little chance of becoming law quickly. Top Republicans, including Senator Orrin Hatch of Utah, say they oppose a short-term measure and prefer addressing the issue as part of a broad revamp of the tax code.
“Tax reform, if it’s done right, will get at the root problem, rather than simply dealing with symptoms,” Hatch, the top Republican on the Finance Committee, said on the Senate floor yesterday.
Levin, who is retiring at the end of 2014, is chairman of the Senate’s Permanent Subcommittee on Investigations. He has held hearings focused on corporate tax avoidance by companies such as Apple Inc. and Caterpillar Inc.