The Treasury Department will decide in the “very near future” what actions it can take to deter U.S. companies from cutting tax bills by moving their addresses to other countries, Treasury Secretary Jacob J. Lew said today.
In a speech in Washington, Lew again urged Congress to revamp the U.S. tax code and pass a retroactive law to curb the deals known as inversions.
With Congress deadlocked, the Treasury “is completing an evaluation of what we can do to make these deals less economically appealing, and we plan to make a decision in the very near future,” Lew said during a speech at the Urban Institute in Washington.
“Any action we take will have a strong legal and policy basis, but will not be a substitute for meaningful legislation - - it can only affect part of the economics,” Lew said.
Lew provided no precise schedule for a decision and gave no new information about the content of potential Treasury rules.
Previous statements from the Treasury Department have said any rules would try to make inversions less economically attractive, suggesting that the department would seek to stem earnings stripping, the post-inversion maneuvers companies use to reduce U.S. taxes on U.S. income.
“I want to emphasize once again how important it is for Congress to solve this problem,” Lew said. “It’s imperative that lawmakers get this done. Still, the administration is clear-eyed about the possibility that Congress may not move as quickly as necessary to respond to the growing wave of inversions.”
U.S. policy makers are trying to curb a trend of inversions, which has escalated this year with decisions by companies including Medtronic Inc. and AbbVie Inc. to seek foreign addresses through mergers, though the executives and operations are changing little if at all.
Lew emphasized the points of agreement between the administration and congressional Republicans, which both support cutting the U.S. corporate tax rate. He said there were “key areas of overlap” between the administration’s framework and a draft plan released earlier this year by House Ways and Means Committee Chairman Dave Camp, a Michigan Republican.
The parties disagree on the taxation of foreign income and about the individual tax code. Democrats say high-income individuals should pay higher taxes.
Lew said that “to prevent a rush of corporate inversions to get in under the wire before a change in the law, legislation should work retroactively, applying to any deal after early May of this year.”
He emphasized that a retroactive law in 2004 to limit inversions was backed by senior Republicans and signed by Republican President George W. Bush.
Senate Democrats may schedule a vote on such a bill -- or on an attempt to limit earnings stripping -- this month before they break to campaign for the November election.
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