Obama urges immediate action on ‘inversions’
By John D. McKinnon
The Obama administration joined the growing debate over U.S. companies reincorporating overseas for tax purposes, urging lawmakers to pass legislation to limit the moves.
In a letter to leaders of the congressional tax-writing committees, Treasury Secretary Jacob Lew said lawmakers “should enact legislation immediately…to shut down this abuse of our tax system.” The letter was reviewed by The Wall Street Journal on Tuesday night.
U.S. Treasury Secretary Jack Lew.
Just this week, two U.S.-based drug firms — AbbVie Inc. /quotes/zigman/13067932/delayed/quotes/nls/abbv ABBV -0.26% and Mylan Inc. /quotes/zigman/75764/delayed/quotes/nls/myl MYL -0.48% — moved ahead with plans for foreign mergers that would allow them to move overseas and reduce their tax rates. They would join a growing list of about 50 U.S. firms that have reincorporated overseas through inversion in the last 10 years, most of them since 2008.
The trend appears to have accelerated in recent months, as Congress has come up short in an effort to pass a comprehensive tax-code rewrite that would address corporate concerns and make the U.S. system more business-friendly.
Meanwhile, the Obama administration in its budget earlier this year had proposed tightening the rules to substantially limit inversions. Fearing that the government might try to nix the moves, some companies and their advisers recently have been scrambling to get deals signed.
To protect themselves from such legislation, companies increasingly are adding details to merger agreements that allow them to walk away from a deal without paying a penalty, or breakup fee, should the tax advantage suddenly be taken away.
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