Sep 22, 2014 5:35 PM
Treasury to unveil steps to curb tax inversions
The Associated Press
WASHINGTON (AP) The Obama administration will outline new steps on Monday to prevent American companies from reincorporating overseas to shirk U.S. taxes, Treasury Secretary Jacob Lew said.
In a so-called "tax inversion," a U.S. business merges with or is acquired by a foreign company in a country with a lower tax rate. During a speech on the economic effects of climate change, Lew called inversions an unfair practice and a "glaring loophole in the U.S. tax code." He said the U.S. would take steps to address it with or without Congress.
President Barack Obama has denounced inversions as unpatriotic and has urged Congress to stop them. But with quick action in Congress unlikely, the Treasury Department has been reviewing potential actions the administration could take without Congress. Treasury is also examining ways to reduce the tax benefits for companies that pursue inversions.
The Obama administration said the best way to address inversions is still through legislation.
The administration's timing also highlights the appeal Democrats believe the issue has with voters. By having Treasury announce new steps now, the White House is practically daring Republicans to voice their opposition.
Obama elevated the issue in July, demanding "economic patriotism" from U.S. corporations that use legal means to avoid U.S. taxes through overseas mergers. "I don't care if it's legal," Obama declared at the time. "It's wrong."
Republicans have resisted targeted efforts to limit such deals, arguing that such a change should be incorporated into a more ambitious overhaul of the tax code. Democrats, in turn, have portrayed Republicans as defenders of corporate loopholes.
Obama had included a proposal to rein in such mergers and acquisitions in his 2015 budget. But the administration placed a more aggressive focus on the issue this summer as a number of high profile mergers and potential mergers began to grab headlines.