Brown-Durbin Bill to Address Inversions: Pay What You Owe Before You Go

New Legislation Would Require Corporations to Pay Their U.S. Tax Bill Before Renouncing Their U.S. Residence

WASHINGTON, D.C. – Following an uptick in corporations changing their address for tax purposes in order to avoid paying U.S. taxes, U.S. Sens. Sherrod Brown (D-OH) and Dick Durbin (D-IL) announced new legislation requiring corporations to “Pay What You Owe Before You Go” – settling their U.S. tax bill before relocating to a foreign country.

“Everyone knows that before you leave a restaurant you have to settle your tab,” Brown said. “Corporations shouldn’t get to play by different rules. While it is critical that we reach a long-term solution that reforms our international corporate tax code by implementing a global minimum tax and reducing the statutory tax rate, this bill is an immediate, commonsense measure to ensure businesses settle up before leaving the U.S.”

“When individuals decide to renounce their U.S. citizenship, they must pay their tax bill before they leave. Corporations should do the same,” said Durbin. “This measure will require corporations to pay their tax bill before they leave the country, preventing them from sticking the rest of us with their bill, and protecting taxpayers while Congress works toward comprehensive tax reform.”

Increasingly, corporations are using accounting gimmicks and tax loopholes to make a foreign country their new home for tax purposes. This maneuver is called an inversion. When multinational corporations invert, they permanently avoid U.S. tax on billions of dollars in foreign profits. The Pay What You Owe Before You Go Act of 2014 would require these corporations to settle up their U.S. tax bill before they declare residency in a new country. U.S. Rep. Lloyd Doggett (D-TX- 35) introduced companion legislation in the House.

According to research firm Audit Analytics, more than 500 American companies held $2.1 trillion in overseas assets in 2013. Below is a table of the top 50.

Company

Deferred Profits (2013)

General Electric Company

$        110,000,000,000

Microsoft Corporation

$           76,400,000,000

Pfizer, Inc.

$           69,000,000,000

Merck & Co., Inc.

$           57,100,000,000

Apple Inc.

$           54,400,000,000

International Business Machines Corporation (IBM)

$           52,300,000,000

Johnson & Johnson

$           50,900,000,000

Cisco Systems, Inc.

$           48,000,000,000

Exxon Mobil Corporation

$           47,000,000,000

Citigroup Inc.

$           43,800,000,000

Procter & Gamble Co.

$           42,000,000,000

Google Inc.

$           38,900,000,000

Hewlett Packard Company

$           38,200,000,000

PepsiCo Inc.

$           34,100,000,000

Chevron Corporation

$           31,300,000,000

The Coca-Cola Company

$           30,600,000,000

JPMorgan Chase, & Co.

$           28,500,000,000

Oracle Corporation

$           26,200,000,000

Amgen, Inc.

$           25,500,000,000

United Technologies Corporation

$           25,000,000,000

Abbott Laboratories

$           24,000,000,000

Bristol-Myers Squibb Company

$           24,000,000,000

Eli Lilly and Company

$           23,740,000,000

The Goldman Sachs Group, Inc.

$           22,540,000,000

Qualcomm Inc. /DE/

$           21,600,000,000

AbbVie

$           21,000,000,000

Medtronic, Inc.

$           20,499,000,000

Intel Corporation

$           20,000,000,000

Phillip Morris International Inc.

$           20,000,000,000

Wal-mart Stores, Inc.

$           19,200,000,000

Dell Inc.

$           19,000,000,000

Apache Corporation

$           17,000,000,000

Caterpillar Inc.

$           17,000,000,000

Bank of America Corporation /DE/

$           17,000,000,000

The Dow Chemical Co. /DE/

$           16,139,000,000

McDonalds Corporation

$           16,100,000,000

E. I. du Pont De Nemours and Company

$           15,978,000,000

eBay, Inc.

$           14,000,000,000

Honeywell International, Inc.

$           13,500,000,000

Corning Incorporated /NY/

$           12,400,000,000

Mondelez International, Inc.

$           12,400,000,000

Baxter International, Inc.

$           12,200,000,000

Boston Scientific Corporation

$           11,902,000,000

Danaher Corporation /DE/

$           10,600,000,000

Occidental Petroleum Corporation /DE/

$           10,600,000,000

Eaton Corporation PlC

$           10,500,000,000

EMC Corporation

$           10,200,000,000

Kimberly Clark Corporation

$             9,800,000,000

3M Company

$             9,700,000,000

American Express Company

$             9,600,000,000

Brown, a member of the Senate Finance Committee and a senior member of the Senate Banking Committee, has repeatedly urged Congress to address inversions and take immediate action to address the broken corporate tax code. In June 2013, Brown submitted a plan to the Senate Finance Committee that would increase American competiveness by overhauling the corporate tax code in order to promote investment in the United States. Brown argued that tax reform must ensure that our nation secures its fiscal future while addressing the challenges of an increasingly globalized economy. Currently, U.S. multinational corporations book over 40 percent of their profits in so-called “tax havens” that contain seven percent of their actual foreign investments and four percent of their foreign workers. For example, the profits of U.S. controlled foreign corporations booked in Bermuda represent 646 percent of that nation’s Gross Domestic Product (GDP).

Brown’s plan would simplify an overly complex international tax system that fails to encourage domestic investment and allows companies to shift domestic profits to tax havens. Specifically, Brown’s plan would:

  • Lower the Statutory Corporate Tax Rate. The U.S. corporate tax rate should be lowered to be competitive with the average of countries that are part of the Organization for Economic Co-operation and Development (OECD), an international economic organization of more than 30 countries whose mission is to stimulate economic progress and world trade. This reduction in the U.S. corporate rate would place domestic companies on a level playing field with their foreign competitors and reduce incentives for companies to shift jobs and profits overseas.
  • Create a Global Minimum Tax Rate. A country-by-country global minimum tax will require corporations to pay the difference between the U.S. corporate tax rate and the rate in their new country. This would remove incentives for offshore tax havens and for tax arbitrage. By narrowing the difference between our rate and that of our competitors, we will minimize the ability to profit from aggressive tax planning. By establishing a flat minimum rate that companies pay in each country in which they do business, we will effectively close down tax havens.

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Press Contact

Meghan Dubyak/Lauren Kulik (Brown) 202-224-3978

Ben Marter (Durbin) 202- 228-5244