WASHINGTON, DC - Ways and Means Committee Ranking Member Sander Levin (D-MI) today released the following statement after the U.S. Treasury Department issued final regulations to limit corporate tax inversions and further address the use of earnings stripping:
“These regulations are another significant step the Administration has taken to restore fairness to the tax system and ensure multinational corporations pay their fair share of taxes. For years, companies have been inverting and engaging in earnings stripping to unfairly lower their tax bills. In the absence of Republican action on tax reform, Treasury has used its Administrative authority to help bring fairness to the tax system. Today’s regulations from Treasury - which took into account extensive comments from the public and intensive meetings with Republicans and Democrats in Congress - go straight to the core of that fairness issue by strongly limiting a company’s ability to use this tax avoidance strategy, which involves disproportionately leveraging a U.S. company with debt and “stripping" the U.S. tax base through deductible interest payments.
“The final regulations rightly made sensible changes to the proposed regulations, ensuring it does not unintentionally interfere with ordinary business transactions, such as transactions related to cash management, transactions where there is a low risk of earnings stripping (e.g., between highly regulated companies), and other issues Democratic Ways and Means Members raised in a June letter to Secretary Lew. However, there is still more work to be done by Congress, which is why I introduced a bill in February to address the issue of earnings stripping - legislation that Republicans refused to consider. If Republicans are serious about reforming our tax code and making it fairer for all Americans, they should begin by joining with Democrats to pass legislation to close corporate tax loopholes."
In February, Rep. Levin and House Budget Committee Ranking Member Chris Van Hollen (D-MD) introduced legislation - the Stop Corporate Earnings Stripping Act - to reduce the number of tax inversions by limiting the use of earnings stripping. A summary of the bill and explanation of the earnings stripping strategy can be found here.
Rep. Levin and other House Democrats also previously introduced legislation - the Stop Corporate Inversions Act ( H.R. 4679 in 2014, H.R. 415 in 2015) - to amend Section 7874 of the tax code to tighten restrictions on inversions. The Joint Committee on Taxation estimates that the legislation would save the U.S. tax base nearly $41 billion over 10 years.
