Durbin bill to target corporate inversions [Chicago Tribune :: ]
(Chicago Tribune (IL) Via Acquire Media NewsEdge) July 29--WASHINGTON -- Sen. Dick Durbin today decried U.S. firms that renounce their corporate citizenship to avoid taxes and said he was introducing a measure to put them at a disadvantage for federal contracts.
"When it comes to a competition between companies, if we have, on one hand, an American company paying its fair share of American taxes, competing with an inverted corporation that has decided to go overseas, we believe, advantage America," the Illinois Democrat said.
He said the measure would send a message to companies seeking to invert: "Think twice."
The measure is called the No Federal Contracts for Corporate Deserters Act.
It would mean federal contracts would not go to businesses that incorporate overseas unless they are at least 50 percent owned by U.S. shareholders and do not have substantial business opportunities in the foreign country in which they are incorporating
The law now defines a company as being "inverted" if it is at least 80 percent owned by U.S. shareholders after it reincorporates overseas, according to Durbin.
Drugmaker AbbVie of North Chicago is among the corporations that recently have announced they are "moving their mailbox overseas to avoid paying their fair share of taxes," according to a Durbin statement.
Deerfield-based Walgreen Co. also is considering such a move.
Durbin appeared at a press conference today in the Capitol with four Democratic lawmakers who support his measure: Sen. Carl Levin of Michigan and Reps. Rosa DeLauro of Connecticut, Sander Levin of Michigan and Lloyd Doggett of Texas.
During the last 10 years, nearly 50 American companies have tried to "evade their basic tax obligation through what is known as inversion," DeLauro said.
She described the process this way: An American company buys a foreign company overseas, then pretends that it is its new headquarters. They don't move their executives or operations, but "they do move their mail box," she said.
"And in effect, they renounce their American citizenship in order to dodge paying taxes in the U.S," she said.
In the past, companies have most often tried the tax-avoidance scheme by pretending to reside in Bermuda and the Cayman Islands, but now Switzerland, the Netherlands, the U.K. and Ireland "are also destinations of choice," DeLauro said.
"And the abuse of this loophole is growing," she said.
She said 14 major inversions have been announced or completed this year.
Companies that invert take advantage of the U.S. education system, infrastructure, research-and-development incentives and a skilled work force, she said.
"But when tax bill comes due they hide overseas," she said.
And when it comes to applying for federal contracts, "they all are as American as Uncle Sam once again," she said.
In response to Durbin's statement, a Walgreen spokesman said the company "hasn't announced any decision on whether to do a tax inversion."
"We expect to announce a decision on that and other issues related to our acquisition of (Switzerland-based) Alliance Boots in the coming weeks, but nothing has been announced at this point," spokesman Michael Polzin said.
The White House estimates that nearly $20 billion in corporate taxes could be lost over the next 10 years because of inversions.
The Democratic lawmakers, when asked the prospects of the bill's passage, it was problematic getting any legislation passed with few planned legislative days remaining before November's mid-term elections.
They noted, though, that some House Republicans had supported amendments to appropriations bills to curb the practice.
Durbin is running for re-election against Republican State Sen. Jim Oberweis on Nov. 4. Oberweis, in response, issued a statement today saying:
"Dick Durbin and his job-killing policies have produced the worst economic recovery in U.S. history and this is just more of the same. It is a poor excuse for tax reform and not a serious attempt to fix our country's anemic economy."
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