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 Nine such deals have been agreed to this year by companies ranging
from banana distributor Chiquita Brands International, Inc to
drugmaker AbbVie Inc and more are being considered. The transactions
are setting a record pace since the first inversion was done 32
years ago.
Witnesses at the Senate Finance Committee's hearing will include
government officials and academics. Chairman Ron Wyden, a Democrat
from Oregon, is expected to call for stand-alone legislation to
respond to the flurry of inversions that has Washington on edge.
Democrats, searching for campaign issues before November's
congressional elections, have jumped on inversions, and several of
them have offered bills that would curb the deals.
But no new law is likely to result as long as Republicans contend
that inversion rules need to be part of a broader overhaul of the
tax code, policy analysts said.
The Republican-controlled U.S. House of Representatives will not act
on inversions "unless there's comprehensive tax reform, and that's
dead for this year," said Greg Valliere, chief political strategist
at Potomac Research Group in a client note on Monday.
Inversions are still rare, but they are becoming more common. Of the
roughly 60 deals done since 1982, more than half have come in just
the last six years, a Reuters review showed.
An inversion involves a U.S. corporation buying or setting up a
smaller company abroad, then shifting its tax home base to that
company's country, which typically has lower tax rates than in the
United States.
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Such deals seldom mean a U.S. corporation physically leaves home.
Usually an inversion means that a company will open a small office
abroad, perhaps in England or Ireland, as a new address for tax
purposes, leaving major operations intact.
But the move can put foreign earnings out of the reach of the
Internal Revenue Service and make other tax savings possible that
can boost a multinational company's bottom line.
U.S. Treasury Secretary Jacob Lew urged Congress last week to take
steps quickly to discourage inversions.
In a letter to members of Congress, he said corporations that do
inversions want to keep U.S. advantages - such as intellectual
property protection, research support, financial security and
reliable infrastructure - without paying for them.
President Barack Obama's 2015 budget proposed making inversions
harder to do by raising the foreign ownership required.
Congressional Democrats have made similar proposals.
Drugstore chain Walgreen Co is weighing a possible inversion.
Drugmaker Pfizer Inc's bid in April to buy UK rival AstraZeneca Plc
was structured as an inversion. That deal collapsed, but it drew
attention to the issue.
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