U.S. Sen. Rob Portman (R-OH) and U.S. Rep. Charles Boustany (R-LA) said on Tuesday that proposed regulations aiming to prevent corporate tax inversions fall short of needed tax reforms.
The Department of Treasury and the IRS announced temporary regulations and proposed permanent ones that aim to reduce the number of corporate tax inversions enabling companies to avoid U.S. taxes by moving tax residences overseas.
Portman, a member of the Senate Finance Committee, said that previous attempts to address inversions through regulatory fixes have failed to solve underlying problems in the tax code.
“They don’t keep jobs and investment in the United States, and ultimately they hurt American workers,” Portman said. “Until we fix these underlying problems — the highest corporate tax rate in the developed world and an international tax system that was developed in the 1960s — American workers and businesses will continue to suffer. This latest attempt is another band-aid. While I appreciate the administration’s continued calls for broader tax reform, their framework calls for billions of dollars of tax hikes on the very U.S. businesses and workers that they claim to be trying to help.”
Portman added that he would continue to make “genuine tax reform” that attracts investment a priority in the year ahead.
Boustany, chairman of the Ways and Means Subcommittee on Tax Policy, questioned the legality of the proposed regulations and referred to a previous admission from Treasury Secretary Jack Lew about the Department of Treasury’s limitations.
“Even after Secretary Lew’s admission that Treasury has no authority to stop inversions on its own, this administration has reverted to its default stance: attempting to make law by executive action,” Boustany said. “Our country doesn’t need more regulation. Our country needs tax reform to make our business climate more competitive and to keep jobs at home. Not to mention, this proposal will do little to stop actual inversions, but will make it more difficult for foreign firms to invest in the United States. This is the wrong approach to a serious problem.”
Under the proposal, foreign companies acquiring multiple American companies in stock-based transactions would be prohibited from using their increased size to sidestep current inversion thresholds. It would also authorize IRS audits to divide debt instruments into part debt and part equity — the current approach treats debt instruments as one or the other.