(Adds Harry Reid's comments)
By Jason Lange and Kevin Drawbaugh
July 16 Calling for a new sense of "economic
patriotism," U.S. Treasury Secretary Jacob Lew urged Congress on
Wednesday to take steps quickly to discourage U.S. companies
from moving their tax domiciles abroad to avoid federal taxes.
"Congress should enact legislation immediately," Lew told a
business conference in New York hosted by cable television
channel CNBC. "We should have some economic patriotism here."
Lew's remarks came amid a wave of corporate deals known as
inversions, in which a U.S. company shifts its tax home base to
a lower-tax country by combining with a company based in that
country. Popular destinations are Ireland and the Netherlands.
Congress is unlikely to take action on inversions until
after November's midterm elections, but political momentum for
some legislation is building, policy analysts said.
Senate Majority Leader Harry Reid told reporters on
Wednesday that inversion legislation was needed before lawmakers
try to revamp the U.S. tax system.
"It's taken far too much time," Reid said. "If we don't do
something about inversion, there will be nothing to do tax
The tax-writing Senate Finance Committee will hold a hearing
on Tuesday on international taxation, including inversions.
The deals are still rare, but a flurry of them in recent
months has prompted concern in Washington. Medical technology
group Medtronic Inc plans to buy Dublin-based rival
Covidien Plc and shift its tax home base to Ireland.
Drugstore chain Walgreen Co is weighing a possible
inversion. Drugmaker Pfizer Inc's bid in April to buy UK
rival AstraZeneca Plc was structured as an inversion.
That deal fell through, but it drew attention to inversions.
"We have a corporate tax policy which is driving capital and
companies overseas," JPMorgan Chase & Co Chief Executive
Jamie Dimon, one of the nation's most influential bankers, said
on a conference call with reporters on Tuesday.
"These people are building R&D plants overseas. They are
sending engineers overseas," he said.
While inversions sometimes result in U.S. job losses, they
often involve setting up a tax domicile abroad that is little
more than a small office, while keeping the bulk of a business's
executive and research operations in the United States.
In a letter to members of Congress on Tuesday, Lew said
corporations that do inversions want to keep the advantages of
being in the United States - such as government-backed
intellectual property protection, research support, financial
security and reliable infrastructure - without paying.
President Barack Obama's 2015 budget, introduced in March,
proposes making inversions more difficult by raising the minimum
levels of foreign ownership required. Congressional Democrats
have made similar proposals.
Lew wrote in his letter, obtained by Reuters, that
legislation should be made retroactive to May 2014. The issue of
retroactivity has been of keen concern to corporations that are
exploring possible inversion deals, tax lawyers said.
(Additional reporting by Kevin Drawbaugh and Emily Stephenson
in Washington and David Henry in New York; Editing by Chizu
Nomiyama and Jonathan Oatis)