July 16, 2014

Senate Finance Committee to Hold Hearing to Discuss Options for Corporate Inversions and Other International Tax Issues

The Senate Finance Committee announced it will hold a hearing on July 22, 2014 to discuss corporate inversions as well as other international tax issues.

According to a letter written by Secretary of the Treasury Jacob Lew to the the House Committee on Ways and Means, there have been recent reports of a number of corporate inversion transactions "designed to change the tax domicile of a U.S.-based multinational firm" involving the purchase of a foreign corporation, the transfer of tax domicile to the foreign firm's country of incorporation, and the shifting of tax liability for the combined firm to the new foreign tax domicile. Secretary Lew explained that firms involved in these transactions are attempting to avoid paying taxes in the United States, while reaping other benefits of being located in the United States.

According to Secretary Lew, the best way to address this situation is through business tax reform that lowers the corporate tax rate and broadens the tax base; he urged Congress to immediately enact legislation to deal with this issue.

At the hearing, Senate Finance Committee Chairman Ron Wyden (D-OR) plans to seek retroactive tax legislation to stop U.S. companies from moving their legal addresses to other countries. The proposed legislation, which would effectively prevent U.S. companies from gaining foreign addresses by buying smaller competitors, and would be retroactive to May 8, 2014.

See: Secretary Lew's Letter; Senate Finance Committee Press Release.