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 LevinPresident Trump, listen to candidate Trump and keep Volcker Rule Republicans can learn from John McCain’s heroism Trump and GOP wise to keep tax reform and infrastructure separate 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."

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“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 HatchHatch urged Trump to ‘speak clearly’ against hate groups The Memo: Trump tries to quiet race storm Senators push FTC to finalize changes to contact lens rule 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 BoehnerIt's time for McConnell to fight with Trump instead of against him How Republicans can bring order out of the GOP's chaos Republican donor sues GOP for fraud over ObamaCare repeal failure 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,” John BoehnerJohn BoehnerIt's time for McConnell to fight with Trump instead of against him How Republicans can bring order out of the GOP's chaos Republican donor sues GOP for fraud over ObamaCare repeal failure 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 WydenRon WydenTrump's Democratic tax dilemma Senate Dems push Trump admin to protect nursing home residents' right to sue Overnight Finance: Trump-Russia probe reportedly expands to possible financial crimes | Cruel September looms for GOP | Senate clears financial nominees | Mulvaney reverses on debt ceiling 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 GrassleyChuck GrassleyWhite House clarifies: We condemn all violence Republican lawmakers criticize Trump response to Charlottesville Grassley reverses ‘expectation’ of Supreme Court vacancy this year MORE (R-Iowa), then-Sen. Max BaucusMax BaucusTrump has yet to travel west as president Healthcare profiles in courage and cowardice OPINION | On Trump-Russia probe, don’t underestimate Sen. Chuck Grassley 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 WhitehouseAmerican horses deserve safety, and the SAFE Act Lawmakers target horse meat trade Dems introduce legislation to protect manned aircraft from drones 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 HironoWeakened patent system causes U.S. to slip as a global leader of IP protection If our innovators have no reward, how will America compete? Three Dem senators call for 'immediate review' of Kushner's security clearance 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 CardinCongress should think twice on the Israel Anti-Boycott Act Don’t let Congress amend the First Amendment Federal anti-BDS legislation – Common sense and constitutional MORE (Md.), Bill NelsonClarence (Bill) William NelsonThe five kinds of Republicans who could primary Trump Overnight Tech: Senate confirms two FCC commissioners | Dems want more time on net neutrality | Tech groups push White House on 'startup visa' Senate confirms two new FCC commissioners 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 StabenowDebbie StabenowHead of McConnell-backed PAC: We're 'very interested' in Kid Rock Senate campaign Juan Williams: Trump and the new celebrity politics Senate Dems unveil trade agenda 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.