Bill Targets U.S. Firms That Move to Avoid Taxes

Sen. Max Baucus (D-Mont.) and Sen. Charles E. Grassley (R-Iowa) plan to introduce legislation today to rein in companies that move their corporate headquarters offshore to avoid U.S. income taxes.

The bill was getting finishing touches Tuesday night, but a Senate Finance Committee staffer said it would include a provision to bar the IRS from recognizing so-called corporate inversions when control of the company primarily remains in the U.S.

Companies that want to save on taxes by creating a new corporate headquarters will have to move in fact, not just fiction, if the bill becomes law.

Grassley is a longtime critic of these fictional moves, saying that while he supports moving a company when legitimate business warrants it, some moves are simply unpatriotic paper-shuffling.

“I have no problem with U.S. companies operating in low-tax countries for legitimate business purposes,” Grassley said last month. “My problem is with companies that set up fictional headquarters in low-tax countries to escape U.S. taxes. These fictional headquarters are no more than a folder in a filing cabinet.”

Several companies that have participated in so-called inversions also are government contractors, Grassley said.

“These corporations are skirting their own taxes, yet profiting from other people’s taxes,” Grassley said. “That’s wrong.”

Grassley previously vowed to bar companies that move for tax purposes from securing government work.