Proposal For US Exit Tax On Inverting Companies

Majority Whip Dick Durbin (D – Illinois) and Sherrod Brown (D – Ohio) have introduced a bill – the Pay What You Owe Before You Go Act of 2014 – into the Senate that would require multinational corporations to settle their United States tax bill before using corporate inversions to move their tax residence abroad.

It was pointed out that, when multinational corporations invert, they permanently avoid US taxation on their unrepatriated foreign earnings that they held before completing the inversion transactions. The proposed bill would therefore specify that those accumulated deferred foreign earnings of inverting corporations would be added to those companies’ taxable income in the last tax year ending before the date of acquisition by a foreign entity.

“When individuals decide to renounce their US 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.”

“Corporations shouldn’t get to play by different rules,” Brown added. “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 US.”