04.05.17

Whitehouse, Doggett Introduce Stop Tax Haven Abuse Act

Bill would make the tax code fairer for American companies and crack down on the use of illegal tax shelters

Washington, D.C. – Today, U.S. Representative Lloyd Doggett (D-TX), a senior member of the House Ways and Means Committee, and Senator Sheldon Whitehouse (D-RI), a member of the Senate Budget Committee, introduced legislation to limit the ways corporations can game our tax system by moving jobs and assets abroad.  The bill would close a number of tax loopholes, eliminate incentives for U.S. companies to move assets and operations offshore, and make it harder for companies to shirk their tax bills through cross-border mergers.  It would also give the government new tools to crack down on the use of illegal tax shelters. 

“Hard working Rhode Islanders can’t use tax havens to avoid paying their taxes.  Corporations and hedge fund managers shouldn’t be able to either,” said Whitehouse. “This bill would make the tax code fairer for American companies that play by the rules.”

“While families work to pay their taxes before the upcoming deadline, ‘tax day’ is more aptly called ‘tax break day’ for many multinational corporations.  The importance of contributing to our national security and vital public services is understood by most Americans but not by those who exploit loopholes to dodge their fair share.  President Trump has talked a big game about getting tough on companies that move offshore, but his proposals so far would only reward tax-dodging multinationals,” said Doggett. 

The Stop Tax Haven Abuse Act would close a number of tax loopholes and help the Internal Revenue Service (IRS) identify foreign tax shelters:

  • Currently, an American company can merge with a smaller foreign firm and incorporate in the foreign country for tax purposes, even if the bulk of its operations and employees remain in the U.S.  The bill would discourage corporations from using these “inversions” by deeming the product of a merger between a U.S. company and a smaller foreign firm to be a U.S. taxpayer, no matter where in the world the new company is headquartered. 
  • Under current law, a company can choose to defer paying taxes on profits, while deducting the expenses incurred to produce the profits.  The bill would require companies to delay taking deductions until they pay taxes on the related profits. 
  • Right now, companies are allowed to simply “check the box” on an IRS form and pretend that some of their foreign subsidiaries don’t exist for tax purposes.  The bill would repeal this nonsensical rule. 
  • Some U.S. corporations are organized in tax havens, like the Cayman Islands, but really do business in the United States.  For instance, one modest building in the Cayman Islands, Ugland House, is the legal home of over 18,000 companies, many of them really American companies in every other sense.  This bill would discourage U.S. companies from incorporating abroad by deeming corporations worth $50 million or more that are managed and controlled in the U.S. to be U.S. taxpayers.
  • Currently, banks must abide by anti-money-laundering due diligence standards before taking on new customers.  The bill would extend this commonsense requirement to professional who help set up shell corporations. 
  • The bill would make it easier for the IRS to obtain the names of the owners of suspicious foreign bank accounts.  It would also increase penalties for corporate insiders who fail to disclose offshore dealings.  

By making it harder for corporations and the wealthy to use foreign tax shelters, the Joint Committee on Taxation has estimated provisions of this bill would cut the federal budget deficit by tens of billions of dollars each year.

The bill has the support of the Financial Accountability and Corporate Transparency (FACT) Coalition, Americans for Tax Fairness, Fair Share, the Institute on Taxation and Economic Policy, the Main Street Alliance, Oxfam America, Public Citizen, U.S. PIRG, and American Sustainable Business Council.

A section-by-section summary of the bill is available here.

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