(Adds Obama remarks, reaction)
By Jeff Mason
LOS ANGELES, July 24 U.S. President Barack Obama
on Thursday hammered U.S. companies that avoid federal taxes by
shifting their tax domiciles overseas in deals known as
"inversions" and called on Congress to pass a bill to end the
During remarks to a rowdy crowd at the Los Angeles Technical
College, Obama promoted what he called "economic patriotism" and
made clear he believed the companies that were engaging in such
practices were not being patriotic. The president is in
California on a three-day fund-raising swing for Democrats.
So-called inversion deals occur when a U.S. company acquires
or sets up a foreign company, then moves its U.S. tax domicile
to the foreign company and its lower-tax home country.
Nine inversion deals have been reached this year by
companies ranging from banana distributor Chiquita Brands
International Inc to drugmaker AbbVie Inc, and
more are under consideration. The transactions are setting a
record pace since the first inversion was carried out 32 years
"Even as corporate profits are higher than ever, there's a
small but growing group of big corporations that are fleeing the
country to get out of paying taxes," Obama said.
"They're technically renouncing their U.S. citizenship,
they're declaring their base someplace else even though most of
their operations are here. You know some people are calling
these companies 'corporate deserters.'"
Several Democrats have offered bills to curb inversions,
which let companies cut their taxes primarily by putting foreign
earnings out of the reach of the Internal Revenue Service.
Obama threw his weight behind the Democratic bills, calling
for a rule change that would deem any company with half of its
business in the United States to be U.S.-domiciled.
The proposed changes, already put forward in the president's
annual budget, would be retroactive to May of this year and
implemented independently of moves to achieve broader tax
"We have seen increased activity from companies in the
inversion space and as a result the president's view ... is that
we should be acting as quickly as possible," a White House
official told reporters on a conference call.
"That will buy us more time and space to ... reform our tax
code as a whole."
Republicans prefer a change to inversions to be part of an
effort to reform the U.S. tax code.
"Under President Obama, the United States has the highest
corporate tax rate in the developed world. It doesn't have to be
that way: Comprehensive tax reform would reduce deductions and
lower tax rates for everyone," said Michael Steel, spokesman for
the Republican speaker of the House of Representatives, John
The White House supports broad tax reform but argues that
action on inversions is needed now.
(Additional reporting by Kevin Drawbaugh in Washington; Editing
by Jonathan Oatis)