By Bernie Becker - 05/14/14 07:27 PM EDT
Sen. Carl Levin (D-Mich.) said he would introduce legislation as soon as Thursday to make it harder for companies to buy foreign businesses to lower their tax bills.
His legislation will come after the U.S. pharmaceutical company Pfizer said it was seeking to merge with a British counterpart, AstraZeneca, in large part to lower its tax rate.
“The trouble is tax reform has been the mantra for doing nothing for a long, long time,” Levin said. “Tax reform, instead of a way to get things done, has been an impediment.”
Levin said he was considering putting a moratorium on inversions in his legislation, which could also be released as early next week.
That would allow his proposal on inversions to expire if lawmakers did successfully overhaul the tax code — a top priority for congressional tax writers, but an area where Democrats and Republicans continue to have significant differences.
The Michigan Democrat’s legislation will be modeled after a plan from President Obama that would make it tougher for companies to merge for tax purposes. Rep. Sandy Levin (Mich.), the senator’s brother and the top Democrat on the House Ways and Means Committee, plans to introduce the same legislation on the other side of the Capitol.
Currently, merged companies that are at least 20 percent foreign-owned would be allowed to change their legal address. Obama’s proposal would increase that to 50 percent.
Levin said that he believes a broad collection of lawmakers is angry that corporations like Pfizer would rely on U.S. tax breaks and other protections offered by the government and still relocate for tax purposes.
“There are a number of Republicans who really, really hate the idea that you can just change an address and avoid paying taxes,” Levin said.
Levin said his legislation would carry extra power because Senate Finance Committee Chairman Ron Wyden (D-Ore.) has also said he wants to combat inversions.
Wyden wrote in a Wall Street Journal op-ed last week that he would push for the 50 percent marker sought by Obama, and would make any legislation retroactive to May 8.
But on Wednesday, Wyden also didn’t sound like he was in any hurry on inversions, saying that he wanted to discuss how to proceed with the top Republican on the Finance panel, Sen. Orrin Hatch (Utah).
“What I am going to be doing is trying to see how we can proceed in a bipartisan way in the Finance Committee,” said Wyden, who added that he wanted to hold hearings soon on tax reform.
Hatch has called the Democratic proposal on inversions “draconian,” and he and other top Republicans have said that companies wouldn’t be as tempted by inversion if the U.S. brings down its top corporate rate of 35 percent.
Wyden also said Wednesday that he “wanted to serve notice” to companies about inversions, and stressed that any eventual solution would still be retroactive to this month.
“Sen. Levin is raising some very important issues,” Wyden said.