Sen. Ron Wyden, D-Ore., the Senate’s top tax-law writer, and other lawmakers are looking to introduce legislation that would discourage U.S. companies from moving their headquarters abroad to skirt U.S. taxes.
In a Wall Street Journal op-ed published Thursday night, Wyden, the chairman of the Senate Finance Committee, wrote that he is concerned about the growing popularity of so-called inversions that businesses use to leave the U.S. tax system for lower taxes overseas. Among the proponents of inversions, he noted, is Pfizer Inc., which announced this year its bid to acquire London-based AstraZeneca Plc, a move that would allow the U.S. drugmaker to reincorporate in the United Kingdom and secure a decreased tax rate.
To keep businesses in the U.S, Wyden wrote that he wants to reduce the corporate tax rate from 35 percent to 24 percent and require a foreign company to own at least half of the stock of a U.S. business for an inversion to occur. Foreign corporations currently need to control at least 20 percent of a U.S. company’s shares to make an inversion possible. The new rule would apply to all inversions taking place from May 8 onward, if Wyden gets his way.
“I don’t approach retroactivity in legislation lightly, but corporations must understand that they won’t profit from abandoning the U.S.,” he wrote.
Wyden’s op-ed followed calls earlier in the day from Sens. Carl Levin, D-Mich., and Orrin Hatch, R-Utah, for legislation that would encourage U.S. companies to keep their headquarters in the U.S.
Levin said he is working with his colleagues to introduce legislation that would make it harder for companies to pursue inversions. As for Hatch, the top Republican on the Senate Finance Committee, he wants legislation that would lower the corporate tax rate but wouldn’t alter inversion rules. The Republican said he fears that changes to the rules would make U.S. businesses “more attractive targets” for foreign takeovers.
“Instead of imposing arbitrary inversion restrictions on companies retroactively, and thereby further complicating the goal of comprehensive tax reform, we should first keep our focus on where we can agree,” Hatch said in a speech delivered on the Senate floor. “By uniting around the goal to create an internationally competitive tax code, we can keep American job-creators from looking to leave in the first place.”
Wyden wrote in his op-ed that he will work with lawmakers in the coming months to make tax-reform legislation possible.
“The window of opportunity to enact comprehensive tax reform that both the business community and individual taxpayers desperately need is short,” he wrote. “Recognizing the unique dynamics that come with a presidential election, there is just over a year to get the job done. But with the cooperation of my colleagues on both sides of the aisle, we can.”