New York Times: New Legislation Targets Inversions From Different Angle

by David Gelle

July 29, 2014

Legislators in Washington ratcheted up the pressure on Tuesday on companies seeking tax relief by moving overseas, introducing a bill that would withhold government contracts from companies that undertake so-called inversion deals.

The No Federal Contracts for Corporate Deserters Act – introduced by four Democrats, Senators Richard Durbin of Illinois and Carl Levin of Michigan, and Representatives Rosa DeLauro of Connecticut and Lloyd Doggett of Texas – seeks to discourage companies from reincorporating abroad by threatening to withhold federal dollars from the offending companies.

“With every successful inversion, the tax burden increases on the rest of us to pay what the corporate inverter doesn’t,” Mr. Durbin said in a statement. “The burden is made worse by allowing companies to profit off of federal contracts paid for by U.S. taxpayers, while those very companies run from their U.S. tax responsibility. We should make permanent the longstanding ban on federal contracts for corporations that have renounced their American corporate citizenship.”

The legislation would be retroactive, affecting any company that had not finalized its inversion by May of 2014. That would affect Medtronic and AbbVie, two big health care companies that have struck deals that will allow them to move abroad. And the bill would affect the Walgreen Company, the big American pharmacy chain, should it attempt an inversion when it completes its buyout of the British pharmacy chain Alliance Boots.

The No Federal Contracts for Corporate Deserters Act would also allow federal agencies to stop doing business with companies if they subcontract with inverted corporations, potentially widening the scope of those affected.

But the prospect of such legislation being enacted remained slim. While both Republicans and Democrats have expressed a willingness to pass legislation targeting inversions, Republicans have said any bill passed should not be retroactive.

This is only the most recent anti-inversion legislation to be introduced. The Stop Corporate Inversions Act of 2014 was introduced in May by Mr. Levin and his brother, Representative Sander Levin, the ranking member on the House Ways and Means Committee. That bill, which is also retroactive, has failed to gain traction.

“Corporations that renounce their citizenship not only invert their business operations but pervert our laws,” Mr. Doggett said. “Those dodging their fair share of taxes should not be rewarded with taxpayer-funded government contracts.”