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Even as more large companies announce plans to take advantage of the inversion loophole to avoid taxes, Congress has refused to move on commonsense legislation that would put an end to inversions. Fortunately, as outlined in a new letter signed by Citizens for Tax Justice and 54 other groups, there are a number of additional actions that the Treasury Department could take without Congressional approval to stem the tide of inversions.

Although Treasury issued new regulations in response to the surge in inversions in 2014 and 2015, Pfizer’s planned inversion with Allergan demonstrates that the regulations so far have been inadequate to prevent this and similar planned inversions by Johnson Controls and IHS. Perhaps the biggest motivation for Pfizer’s planned inversion is that it could allow the company to avoid an estimated $40 billion in taxes that it owes on the $194 billion in untaxed earnings the company has offshore. Expatriating to Ireland through an inversion will allow Pfizer to avoid paying any tax on its offshore hoard through an accounting gimmick called a hopscotch loan, which effectively allows the new foreign parent company to reinvest its untaxed offshore earnings without triggering the US taxes it would normally owe.

Treasury’s earlier inversion ruling disallowed hopscotch loans in the case of inverted companies which are owned by 60 percent of the shareholders of the original US company, but Pfizer skirted this regulation by structuring its merger so that only 56 percent of the new company was owned by US shareholders. As the letter to Treasury lays out, Treasury should use its existing authority to change its threshold to 50 percent or even lower, which could have the effect of ensuring that Pfizer would not be able to take advantage of hopscotch loans to avoid the $40 billion that it owes and could prevent its inversion altogether. In fact, changing this regulation could not only stop Pfizer, but it could have the effect of stopping similarly structured inversions by IHS and Johnson Controls (both of which structured ownership to be just under the 60 percent threshold) as well as other companies considering following in their footsteps.

Even if Treasury does fully implement the proposal on hopscotch loans, the reality is that its authority to take on inversions is relatively limited, meaning that legislation is required to put a permanent stop to inversions and related tax avoidance. The most prominent piece of anti-inversion legislation is the aptly named Stop Corporate Inversions Act, which would no longer allow a newly merged company to claim to be foreign if it continues to be managed and controlled in the United States or if the new parent company is more than 50 percent owned by the shareholders of the original American company. In addition, legislators have taken direct aim at the tax incentives behind corporate inversions with legislation that would curb earnings stripping and legislation that would require companies to pay what they owe on unrepatriated foreign earnings before they become a foreign company. In other words, Congress has plenty of ways to stop inversions, they just need to stop sitting on their hands and take action before more revenue is lost to this egregious loophole.