Feds crack down on companies moving abroad to dodge taxes
WASHINGTON - The Obama administration is moving to deter companies from reincorporating abroad to lower their U.S. taxes.
The U.S. Treasury Department says it's putting forward regulations that will make inversions less lucrative by barring some techniques companies use to defer their taxes. It's also making it harder for companies to pursue an inversion by tightening the requirement that the company's former owners own less than 80 percent of the new company.
Treasury Secretary Jacob Lew says the steps will ensure that it's no longer financially beneficial for companies to use that tactic.
The new measures will take effect immediately.
In a so-called "tax inversion," a U.S. business merges with or is acquired by a foreign company in a country with a lower tax rate. Since 1983, some 76 U.S. corporations had moved their tax domiciles out of the country, with the pace picking up in recent years, the Congressional Research Service said in July.
Large inversions announced this year include U.S.-based AbbVie's (ABBV) proposed $55 billion deal to buy Britain's Shire and Valeant Pharmaceuticals' (VRX) $53.3 billion unsolicited bid for Canada's Allergan (AGN), the maker of Botox.
Earlier this year, Lew urged lawmakers to crack down on the practice.
"We've recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill, and I'm glad that Secretary Lew is exploring additional actions to help reverse this trend," President Obama said in a statement.
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