Anti-Inversion Tax Bill Raises 72% More Than Prior Estimate

A Democratic plan to stop U.S. companies from completing inversion transactions would raise $33.6 billion for the federal government over the next decade, according to an updated analysis from congressional estimators.

That estimate is 72 percent higher than one released earlier this year by the nonpartisan Joint Committee on Taxation.

The previous estimate “did not properly reflect the appetite of some U.S. corporations for inversions,” Thomas Barthold, the group’s chief of staff, wrote in a memo released today by congressional Democrats. In an inversion, a U.S. company reduces its tax rate by moving its address out of the country, often without moving its operations or executives.

The proposal, written by Representative Sander Levin of Michigan, would prevent U.S. companies from conducting inversions by purchasing a smaller foreign business. Current rules allow inversions as long as the U.S. company’s shareholders own no more than 80 percent of the combined company.

Companies including Medtronic Inc. and Burger King Worldwide Inc. have pending inversion deals. Others, including Pfizer Inc., have publicly considered such transactions.

Levin’s bill stands almost no chance of becoming law before Congress adjourns for 2014 and even less chance after Republicans take control of the Senate next year.

New Rules

The Treasury Department outlined new anti-inversion rules in September. That’s not enough, Levin said in a statement today.

“The new estimates make clear that immediate legislative action is necessary,” he said.

The estimate doesn’t assume that all inversions will be stopped by the bill, Barthold wrote.

U.S. companies that have already carried out inversions are likely to cost the government a record $2.2 billion or more in lost tax revenue next year, double the amount in 2014, according to calculations based on companies’ financial results.

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