Offshore tax deals in the cross hairs

A group of Democratic senators unveiled a bill Tuesday that would limit a corporation's ability to shift its address offshore for tax purposes.

Sen. Carl LevinCarl LevinCongress: The sleeping watchdog Congress must not give companies tax reasons to move jobs overseas A lesson on abuse of power by Obama and his Senate allies MORE (D-Mich.), a longtime crusader against tax evasion and avoidance, said the bill would put a two-year moratorium on the practice, known as "inversion."

“It will be very, very difficult if this bill is passed for companies to invert,” Levin told reporters at a news conference.

The measure, co-sponsored by 13 other Democrats and modeled after a proposal from President Obama, would drastically raise the amount of foreign ownership a merged company needs to be treated as foreign for tax purposes.

Currently, a company can avoid U.S. income taxes if a fifth of the stockholders in the merged company were not a part of the U.S. business. Obama and Levin want to bump that figure up to 50 percent.

And even if companies meet that ownership standard, the bill would still treat them as American for tax purposes if the corporation’s management stays in the U.S. or if at least a quarter of its employees, sales or assets remain domestic.

Lawmakers began eyeing those sorts of mergers again after the drug giant Pfizer sought to take over the British pharmaceutical company AstraZeneca.

Rep. Sandy Levin (Mich.), the top Democrat on the House Ways and Means Committee, and Sen. Levin’s brother, is introducing similar legislation in the House. Rep. Levin's bill skips the two-year moratorium and takes a more long-term approach to inversions, with the congressman saying the idea should "stand on its own two feet."

The measures would be retroactive to this month, meaning that it would have applied to the Pfizer and AstraZeneca merger, though AstraZeneca recently rejected Pfizer’s final offer.

Levin said that he went with the moratorium approach instead of a permanent ban to try to lure lawmakers — such as Sen. Orrin HatchOrrin Grant HatchMcConnell names Senate GOP tax conferees Ryan pledges 'entitlement reform' in 2018 Utah governor calls Bannon a 'bigot' after attacks on Romney MORE (Utah), the top Republican on the Senate Finance Committee — into dealing with inversions through more comprehensive tax reform.

“If they can achieve that in two years, fine,” Levin said. “The question is what do we do in the meantime.”

Congressional aides and lobbyists believe tax reform could be years away. But the Senate has also had trouble pushing through even broadly bipartisan bills on energy efficiency and tax breaks in recent weeks, as Democrats and Republicans fought over floor and amendment procedures.

Hatch and Ways and Means Committee Chairman Dave Camp (R-Mich.) have essentially said that targeted inversion legislation would be ineffective as long as the U.S. has the highest corporate tax rate in the industrialized world, 35 percent, and continues to tax offshore corporate income.

Speaker John BoehnerJohn Andrew BoehnerJohn Feehery: A political forest fire Trump's pick for Federal Reserve chief is right choice at right time The two-party system is dying — let’s put it out of its misery MORE (R-Ohio) echoed those concerns on Tuesday, telling reporters that inversions were “one of the reasons why we have to have tax reform.”

“U.S. companies have $2.2–2.3 trillion worth of corporate profits sitting overseas. Because of our broken tax code, we make it virtually impossible for them to bring that back here, and they’ve got a responsibility to their shareholders,” BoehnerJohn Andrew BoehnerJohn Feehery: A political forest fire Trump's pick for Federal Reserve chief is right choice at right time The two-party system is dying — let’s put it out of its misery MORE said.

“So we bear some of the responsibility in forcing companies to actually take steps like this, because we make it so expensive for them to bring those earnings back here."

The Finance Committee chairman, Sen. Ron WydenRonald (Ron) Lee WydenDemocratic senator predicts Franken will resign Thursday Avalanche of Democratic senators say Franken should resign Lobbying world MORE (D-Ore.), has said that he believes tax reform is the best vehicle for addressing inversion and did not sign on to the new measure, even though he has said that he backs the basic plan outlined by the Levins.

Wyden said that he had already discussed hearings on tax reform that would likely touch on inversions.

“This question of invrsion and a lot fo the good work that Sen. Levin has been doing and talked about is essential to bring up in the context of international tax reform,” Wyden said.

But even as they tried to entice Republicans to their side, Democratic senators also said they regretted that tackling the issue was no longer bipartisan.

Sen. Chuck GrassleyCharles (Chuck) Ernest GrassleyGrassley blasts Democrats over unwillingness to probe Clinton GOP and Dems bitterly divided by immigration Thanks to the farm lobby, the US is stuck with a broken ethanol policy MORE (R-Iowa), then-Sen. Max BaucusMax Sieben BaucusBooker tries to find the right lane  Top Lobbyists 2017: Hired Guns GOP tries to keep spotlight on taxes amid Mueller charges MORE (D-Mont.) and then-Rep. Bill Thomas (R-Calif.) all showed an interest the last time Congress eyed inversions, almost a dozen years ago.

“I’m only sorry that we’re not a bipartisan group standing here today,” said Sen. Sheldon WhitehouseSheldon WhitehouseOvernight Regulation: Net neutrality supporters predict tough court battle | Watchdog to investigate EPA chief's meeting with industry group | Ex-Volkswagen exec gets 7 years for emissions cheating Overnight Energy: Watchdog probes Pruitt speech to mining group | EPA chief promises to let climate scientists present their work | Volkswagen manager gets 7 years for emissions cheating EPA head pledges to protect climate scientists MORE (D-R.I.), one of the bill’s co-sponsors. “But I guess now the Republican passion against taxes has come to the point where they are now willing to allow for and accommodate tax avoidance and tax cheating.”

Sen. Mazie HironoMazie Keiko HironoDemocrats turn on Al Franken The Hill's 12:30 Report Avalanche of Democratic senators say Franken should resign MORE (D-Hawaii) also pushed back on the idea that legislation should wait for tax reform, echoing Whitehouse’s comments that the tax code is “fundamentally corrupt.” Hirono noted that many corporations already pay far less than the statutory 35 percent corporate rate.

“Waiting for comprehensive tax reform is like waiting for Godot,” said Hirono, another co-sponsor.

Several Democrats who sit on the Finance Committee — Sens. Ben CardinBenjamin (Ben) Louis CardinDems demand Tillerson end State hiring freeze, consult with Congress Former New Mexico gov: Trump's foreign policy is getting 'criticized by everybody' Dems put hold on McFarland nomination over contradictory testimony: report MORE (Md.), Bill NelsonClarence (Bill) William NelsonOvernight Health Care: Ryan's office warns he wasn't part of ObamaCare deal | House conservatives push for mandate repeal in final tax bill | Dem wants probe into CVS-Aetna merger Ryan's office warning he wasn't part of deal on ObamaCare: source Overnight Health Care: Funding bill could provide help for children's health program | Questions for CVS-Aetna deal | Collins doubles funding ask for ObamaCare bill MORE (Fla.) Jay RockefellerJay RockefellerOvernight Tech: Trump nominates Dem to FCC | Facebook pulls suspected baseball gunman's pages | Uber board member resigns after sexist comment Trump nominates former FCC Dem for another term Obama to preserve torture report in presidential papers MORE (W.Va.) and Debbie StabenowDeborah (Debbie) Ann StabenowThe Hill's 12:30 Report Avalanche of Democratic senators say Franken should resign Democrats to Trump: Ask Forest Service before shrinking monuments MORE (Mich.) — have also signed on to the legislation.

Some lobbyists have suggested that, because of the Washington gridlock, corporations would and should brush aside Levin’s bill and Wyden’s threat to deal with inversions.

But Levin said Tuesday that companies would do that at their own peril, given that Wyden wants to make any legislation effective to this month.

“If we didn’t do that, I think there would be a rush to inversion,” Levin said.

This post was updated at 6:59 p.m.