Draft U.S. tax inversion plan would target earnings stripping

By

The No. 3 U.S. Senate Democrat has circulated a draft proposal to crack down on U.S. companies that invert, or merge with foreign competitors to get lower tax rates, and it would apply to deals as far back as 1994.

The plan developed by Senator Chuck Schumer of New York would reduce the incentives for companies to invert, according to a draft document that Reuters viewed.

Schumer's plan, which he has not formally introduced and which could still change, would curb the use of a strategy used by inverted companies and known as earnings stripping.

In earnings stripping, a company's foreign headquarters piles debt on the U.S. subsidiary, which then can pay back income earned in the United States as interest on the debt and claim tax deductions.

Bloomberg first reported on the draft bill.

Democrats are weighing a number of options to prevent inversions, which they say are unpatriotic and deprive the United States of tax dollars. The companies say higher U.S. corporate tax rates, especially for income earned overseas, makes it difficult for them to remain in the United States.

There have been a number of inversion deals in recent years, most recently when Burger King Worldwide Inc (BKW.N) announced it would merge with Canada's Tim Hortons Inc (THI.TO).

Senate Democrats have proposed other methods to attack inversions, but it is unclear whether any of them will move forward in the current, bitterly divided Congress. The Treasury Department also has said it is looking into options to prevent the deals.

Tags
Democrat, United States
Join the Discussion
More News
No Jail for Medical Student Found Guilty of Raping Drunk

No Jail for Medical Student Found Guilty of Raping Drunk Woman Who 'Couldn't Possibly Consent': He Is 'Young' and 'Talented'

Puerto Rican Server Told to 'Go Back to Mexico' By

Puerto Rican Server Told to 'Go Back to Mexico' by Customers in Racist Note: 'No Tips for Illegals'

Georgia Man Chris Louis Leaves Children at McDonald's

Georgia Dad Left Young Children at McDonald's While He Went to a Job Interview. Cops Were Waiting When He Returned

Kolstad Stoeckel

Minnesota Man Begged Deputies to 'Put One in My Head' After Shooting Sleeping Roommate: Police