Peters Cosponsors Bill Targeting Corporate Tax Inversions
WASHINGTON, DC - U.S. Senator Gary Peters (MI) today announced that he has cosponsored legislation aimed at further curbing loopholes used by corporations to avoid paying taxes by moving their headquarters overseas. The Stop Corporate Inversions Act will reduce business practices known as “inversions,” a practice in which American corporations merge with foreign businesses and move their tax addresses abroad. As a result, these corporations pay significantly less in U.S. taxes - even if major corporate operations remain in the United States. Recently, the U.S. Department of the Treasury announced new efforts to tackle inversions and reduce the ability of companies to avoid taxes.
“It is unacceptable that major corporations are taking advantage of our tax system to avoid paying taxes, while Michigan families and small businesses are paying their fair share,” said Senator Peters. “While I applaud the Treasury Department’s recent announcement to limit inversions, Congress has a responsibility to permanently close the inversion loophole and ensure a fair tax code for all Americans. I’m pleased to join my colleagues in supporting this legislation that will help foster economic growth across the country.”
According to the Congressional Budget Office, the Stop Corporate Inversions Act will raise $34 billion over the next ten years. Specifically, this legislation:
- Closes a loophole used by companies to lower U.S. taxes. Current law prohibits an inversion – for tax purposes – if the shareholders of the foreign company own 20% or less of the new combined corporation. This legislation would increase that threshold to 50%.
- Includes a provision in which, regardless of the percentage ownership in the new combined corporation, if the affiliated group that includes the combined foreign corporation is managed and controlled in the United States and engages in significant domestic business activities in the United States, the U.S. corporation cannot invert.
- Repeals the 60%-80% ownership test and the “inversion gain” applicable to such stock ownership percentages.
- Maintains the substantial business exception under Section 7874 of the tax code if the combined foreign corporation has substantial business activities in the foreign country where the combined entity is incorporated.
The legislation is supported by the UAW, the AFL-CIO, SEIU, Main Street Alliance, Public Citizen, Americans for Democratic Action, Americans for Tax Fairness, Citizens for Tax Justice, and the Economic Policy Institute, among others.
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