Coalition urges Treasury action to prevent offshore tax deals

The Financial Accountability and Corporate Transparency (FACT) Coalition is urging the Treasury Department to take further action to prevent companies from reincorporating overseas to lower their taxes.

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“It is time we eliminate this egregious offshore loophole to make sure that the corporations that benefit from all of the resources, protections, and markets in the United States pay their fair share of taxes,” the FACT Coalition said in a letter to Treasury Secretary Jack LewJacob (Jack) Joseph LewOvernight Finance: US reaches deal with ZTE | Lawmakers look to block it | Trump blasts Macron, Trudeau ahead of G-7 | Mexico files WTO complaint Obama-era Treasury secretary: Tax law will make bipartisan deficit-reduction talks harder GOP Senate report says Obama officials gave Iran access to US financial system MORE on Monday. The coalition has more than 100 members and seeks "a more honest, transparent, and fair international tax system."

The letter comes after several companies announced over the last few months that they would undertake transactions called “corporate inversions.” In an inversion, a U.S. company merges with a foreign company and locates the headquarters of the combined businesses overseas to lower its tax burden.

The FACT Coalition wants the Treasury Department to expand guidance that limits the ability of inverting companies to use certain strategies to access their offshore profits without paying U.S. taxes on them.

Under guidance Treasury issued in 2014, these strategies are limited to inverted companies in which at least 60 percent of the inverted company is owned by shareholders of the original American company. The coalition wants Treasury to apply the limits to all foreign-ownership cases, and it said that even lowering the threshold to 50 percent “could have the effect of curbing a significant amount of inversion-driven tax avoidance.”

Lew has said Treasury is considering further guidance aimed at curbing inversions but that only Congress could stop them. The FACT Coalition said legislation would be “ideal,” but “the political reality is that Congress is unlikely to act before next year.”

“Unfortunately, the many planned inversions—such as those by Pfizer, IHS, and Johnson Controls—show that immediate action is needed to prevent a significant erosion in the corporate tax base,” the coalition said.

Similar letters have also been sent to Lew recently by Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) and by a group of organizations that includes members of the FACT Coalition.