By Kristina Wong - 05/20/14 11:34 AM EDT
New legislation backed by 14 Democratic senators would impose a two-year moratorium during which corporations couldn’t shift their residences overseas to avoid paying U.S. taxes.
The bill targets a tax practice known as “inversion,” which allows a company to lower its corporate tax bill by moving its address out of the U.S.
“The Treasury is bleeding red ink, and we can’t wait for comprehensive tax reform to stop the bleeding. Our legislation would clamp down on this loophole to prevent corporations from shifting their tax burden onto their competitors and average Americans while Congress is considering comprehensive tax reform.”
Levin is a longtime proponent of ending tax breaks for corporations, but Republicans oppose raising taxes on businesses.
The bill has 12 other Democrat co-sponsors: Sens. Sheldon Whitehouse (R.I.), Dianne Feinstein (Calif.), Tim Kaine (Va.), Brian Schatz (Hawaii), Mazie Hirono (Hawaii), Ben Cardin (Md.), Jay Rockefeller (W.Va.), Barbara Boxer (Calif.), Bill Nelson (Fla.), Tim Johnson (S.D), Debbie Stabenow (Mich.) and Elizabeth Warren (Mass.), as well as Sen. Angus King (I-Maine).
“This bill is a necessary step to crack down on companies that use gimmicks to avoid paying taxes,” Feinstein said. “What we need is a complete overhaul of the corporate tax code. Until that happens, Congress must act to prevent companies from exploiting loopholes that unfairly lower their tax bills.”
According to a statement from Levin's office, current law allows a U.S. company to avoid paying U.S. income taxes if it merges with an offshore company and transfers 20 percent of its stock to shareholders of that company.
Levin's bill would raise that threshold to 50 percent, so that if the majority of a company’s stock remains in the hands of the U.S. company’s shareholders, it is treated as a U.S. company for tax purposes.
The bill would bar companies from shifting tax residence offshore if their management control and significant business operations remain in the United States.
The two-year moratorium would provide time for Congress to work on comprehensive corporate tax reform, the statement said.
Companion legislation is being introduced in the House by Rep. Sandy Levin (D-Mich.), Carl Levin’s brother.