Durbin, Reed, Levin, Doggett Re-Introduce Corporate Inversions Act of 2015

Press Release

U.S. Senator Dick Durbin (D-IL) today joined U.S. Senator Jack Reed (D-RI) and U.S. Representatives Sandy Levin (D-MI) and Lloyd Doggett (D-TX) in re-introducing the Stop Corporate Inversions Act of 2015, which aims to stop business practices known as inversions -- corporate deals that allow U.S. companies to move their tax domicile overseas to evade U.S. taxes.

"We've heard this story over and over. Profitable corporations finding a loophole in the tax code to avoid their tax responsibility. It's known as corporate inversion but some call it corporate desertion," Durbin said. "It's been estimated that this practice will cost taxpayers 34 billion dollars over the next 10 years if we don't close this loophole."

Congress enacted Section 7874 of the Internal Revenue Code in 2004 to discourage U.S. companies from acquiring smaller foreign companies and moving their tax home to a foreign jurisdiction as part of the overall transaction.

Since the provision was enacted in 2004, more than 40 U.S. corporations have inverted, many by acquiring a smaller foreign company to avoid Section 7874. The Stop Corporate Inversions Act of 2015 would close this loophole and raise nearly $34 billion over ten years:

The bill would treat a combined foreign corporation as a domestic corporation under two circumstances -- (1) if the shareholders of the former U.S. corporation own more than 50 percent of the new combined foreign corporation, or (2) if the affiliated group that includes the combined foreign corporation is managed and controlled in the United States and engages in significant domestic business activities in the United States.

The bill would repeal the 60 and 80 percent ownership tests as well as the inversion gain applicable under such circumstances.

The bill would maintain the foreign substantial business exception under Section 7874 by exempting the affiliated group if it has substantial business activities in the foreign country where the new combined corporation is incorporated.

The bill would apply to inversions completed after May 8, 2014.

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