Press Releases

End Citizens United Statement on Trump Administration Reversing Corporate Inversion Rule

Oct 08, 2019

End Citizens United released the following statement after reports that the Treasury Department is considering rolling back a rule to prevent American corporations from hiding profits overseas to avoid paying their fair share in taxes:

“After slashing taxes for corporations and raising them for middle class Americans, the Trump administration wants to make it easier for corporations to hide profits offshore and avoid paying even less than their fair share in taxes,” said End Citizens United President Tiffany Muller. “President Trump is the most corrupt president in American history and there is nothing his administration won’t do for corporate special interests.”

Bloomberg: Trump Weighs Weakening Obama Rules to Curb Corporate Inversions
By Allyson Versprille, Isabel Gottlieb, and Laura Davison

Treasury Department officials are considering rolling back a tax rule aimed at preventing American companies from moving money offshore to avoid U.S. taxes, according to several people familiar with discussions.

The Treasury is looking at regulations intended to prevent American firms from lowering their U.S. tax bills by shifting income to their offshore branches that they can loan to their domestic branches and deduct the interest off their Internal Revenue Service bills. The department is also contemplating repealing them entirely to replace them with something more business-friendly.

The move could make it easier for companies to use accounting tactics to minimize their U.S. earnings and inflate their foreign profits, which are frequently taxed at rates lower than the current 21% domestic corporate levy. The existing regulations were aimed at stopping U.S. companies from moving their headquarters to a lower-tax country, known as a corporate inversion.

Modifying the regulations, commonly referred to as the debt-equity rules, would also count as one of President Donald Trump’s favorite kinds of policy: reversing a regulation introduced in the final days of President Barack Obama’s term.

Corporations resisted the original rules, published in 2016, arguing that the Internal Revenue Service was overstepping its authority. The rules allowed the agency to re-characterize tax-advantaged inter-company loans as equity, removing one of the main incentives for U.S. companies to move their headquarters to countries with corporate tax rates lower than the U.S. rate, then set at 35%.

Critics of the regulations say the rules are no longer necessary because the 2017 tax law made corporate inversions less attractive, thanks to lower tax rates and limits on how much interest companies can deduct. Businesses argue that the regulations, under tax code Section 385, apply too broadly to non-abusive transactions and create onerous requirements by making companies track every loan.

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