Remapping the Debate: Congress Fiddles While the Treasury Burns

By T. J. Lewan, June 25, 2014

Corporate “inversions,” as they’re known in accounting parlance, are transactions in which U.S. corporations take over smaller foreign rivals from low-tax countries and allow those rivals to replace the American firm as parent of the corporate group.

Few members of Congress will admit to being sanguine about these tax ploys: Congress’ bipartisan Joint Committee on Taxation projects $19.5 billion of tax revenues lost to inversions over the next 10 years, a dismal prospect for a country with a strained social safety net already struggling to balance its books.

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The Levin bill is effective precisely because it is multi-layered, said Steve Wamhoff, legislative director for Citizens for Tax Justice, a nonprofit advocacy group in Washington, D.C., and a policy analyst at the Institute on Taxation and Economic Policy.

“Under these rules, you’ll have to hand over the ownership of the majority of your company, do less than a quarter of your business in the United States, and move your management overseas.” The headquarters test — which would put the United States more in line with how many foreign governments define the nationality of companies for tax purposes — is, in Wamhoff’s view, the nail in the coffin for those tax-motived inversions he describes as “offensive.”

The bill would force top executives and senior managers of corporations that sought to change their tax status to pack up and move abroad themselves, he says. That “is such a dramatic step for many companies that I just don’t see it happening.”

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