Democrats Oppose Republican Repeal of Measure Curbing Corporate Tax Avoidance
WASHINGTON, DC – Today, all House Ways and Means Committee Democrats joined together in urging their colleagues to oppose a resolution that would repeal recently finalized Department of Treasury rules that reduce tax incentives for corporate inversions – a practice in which some corporations have renounced their American citizenship to avoid their share of American taxes.
"Corporations that benefit from our educated workforce, national security, and infrastructure should not be able to claim the benefits of being American, while renouncing their citizenship in order to avoid their responsibilities as taxpayers," said Tax Policy Subcommittee Ranking Member Lloyd Doggett. "While much more action is needed, these important rules have already stopped some shenanigans. Repealing this modest Treasury rule would be an invitation for more corporations to head abroad. The pending repeal resolution represents a troubling leap backwards."
The Treasury Department took these important steps amidst the refusal of Congressional Republicans to take any action to address the wave of corporate "inversions," whereby a U.S. company reincorporates abroad to lower its tax bill. Using existing authority under Section 385 of the tax code, these regulations reduce one of the major tax benefits of inverting by curtailing a tax avoidance strategy known as "earnings stripping." The rules were finalized on October 13 after significant changes that incorporated extensive feedback from the business community.
While they have not stopped every inversion, their announcement prompted U.S. drug maker Pfizer to cancel its plans to become a foreign company by merging with Allergen, a maneuver that would have cost the U.S. Treasury an estimated $35 billion.
Pending H.J. Resolution 54 would invoke the Congressional Review Act – an expedited process for repealing rules—to repeal this anti-inversion measure and prohibit Treasury from crafting any future rules to tackle this type of tax avoidance.
You may view the full statement below.
February 8, 2017
Dear Colleague:
We urge you to vote no on H.J. Resolution 54, a Republican proposal to repeal Treasury's finalized debt-equity regulations issued under Section 385 of the tax code. These regulations are intended to combat aggressive corporate tax planning techniques that, rather than serving an economic purpose, are used by some corporations to avoid taxes.
Treasury took these important steps amidst the refusal of Republicans in Congress to address the wave of corporate "inversions," whereby a U.S. company reincorporates abroad to lower its tax bill. Using existing authority under Section 385 of the tax code, these regulations reduce one of the major tax benefits of undergoing an inversion by curtailing a tax avoidance strategy known as "earnings stripping."
While these measures have not stopped every inversion, once they were announced, U.S. drug maker Pfizer immediately canceled its inversion plans to become a foreign company by merging with Allergen, a maneuver that would have cost the U.S. Treasury an estimated $35 billion.
When the draft debt-equity rules were announced in April of last year, members of Congress from both parties raised concerns that the rules had the potential to adversely affect ordinary business transactions that lacked a tax avoidance motive. Treasury made extensive revisions to its original draft in order to address these concerns.
By moving to repeal Treasury's anti-earnings stripping rules, Republicans in Congress will open the door to more companies renouncing their U.S. citizenship for tax purposes, while still reaping the benefits of doing business in America -- a tax practice President Trump railed against on the campaign trail. By invoking the Congressional Review Act, Republicans will block Treasury from crafting any more regulations to tackle this type of tax avoidance. We urge you to vote no on this Joint Resolution.
Respectfully,
Richard Neal
Ranking Member, Committee on Ways and Means
Lloyd Doggett
Ranking Member, Subcommittee on Tax Policy, Committee on Ways and Means
Sander Levin
Committee on Ways and Means
John Lewis
Committee on Ways and Means
Mike Thompson
Committee on Ways and Means
John B. Larson
Committee on Ways and Means
Earl Blumenauer
Committee on Ways and Means
Ron Kind
Committee on Ways and Means
Bill Pascrell Jr.
Committee on Ways and Means
Joseph Crowley
Committee on Ways and Means
Danny Davis
Committee on Ways and Means
Linda Sánchez
Committee on Ways and Means
Brian Higgins
Committee on Ways and Means
Terri Sewell
Committee on Ways and Means
Suzan DelBene
Committee on Ways and Means
Judy Chu
Committee on Ways and Means