U.S. Democratic senators on Thursday said they are considering legislation to prevent corporate inversions, an increasingly-popular transaction that involves U.S. companies reincorporating overseas to avoid U.S. taxes.
Senator Finance Committee chairman Ron Wyden, a Democrat, said he wants to make it harder for U.S. companies to move their headquarters abroad to lower their taxes for inversion deals that take place on or after May 8, 2014.
“I don’t approach retroactivity in legislation lightly, but corporations must understand that they won’t profit from abandoning the U.S.,” Wyden said in a Wall Street Journal editorial posted online late Thursday.
Wyden said he wants to increase to 50 percent from 20 percent the amount of stock a foreign company must own in a U.S. company for an inversion deal to legally take place.
Additionally, Wyden called for comprehensive tax reform as a way to make the U.S. more business friendly.
“I’m committed to making this happen and including changes in the inversion rules as part of a tax overhaul,” Wyden said.
Earlier on Thursday, Democratic Senator Carl Levin, a long-time advocate for closing corporate tax loopholes, said he is also talking with senators about potential legislation.
“It’s become increasingly clear that a loophole in our tax laws allowing these inversions threatens to devastate federal tax receipts. We have to close that loophole,” said Levin in a statement.
Levin is the chairman of the Senate Permanent Subcommittee on Investigations, which has held hearings to shed light on U.S. companies’ legal efforts to avoid U.S. taxes.
A recent bid from drug-maker Pfizer Inc to acquire AstraZeneca Plc, renewed attention on corporate inversions. The potential deal would allow U.S.-based Pfizer to re-domicile in Britain to take advantage of a significantly lower corporate tax rate there.
In April, days after the potential Pfizer deal was made public, the Obama administration said it was seeking ways to curb inversions.