WASHINGTON - Legislation to deter U.S. companies from moving their addresses overseas should avoid retroactive taxes, prevent a net tax increase, and move toward a revamping of the tax code, Sen. Orrin Hatch (R., Utah) said Tuesday.
The comments by Hatch, the top Republican on the Senate Finance Committee, offered slim prospect that Congress might find a path to a bipartisan agreement addressing the growing number of corporate inversion deals. Many of the deals involve health care companies, including some in the Philadelphia region.
"Whatever approach we take, it should not be retroactive or punitive," Hatch said at a hearing on international taxes. "If we actually want to accomplish something on this issue, we're going to have to work together."
Hatch's opposition to a retroactive bill benefits the eight U.S. companies with pending deals to purchase foreign businesses, change addresses, and reduce U.S. taxes. Democrats, including Finance Chairman Ron Wyden of Oregon, support legislation retroactive to May that would make it impossible for U.S. companies to escape the country's tax system by purchasing smaller foreign businesses.
"The inversion virus now seems to be multiplying every few days," Wyden said. "The time for action is now."
Wyden said after the hearing that he did not want to negotiate in public and that he and the committee were exploring a "variety of possibilities."
He would not answer directly when asked whether the Finance panel might act before Congress is set to leave Washington in early August for a monthlong break.
The eight companies are AbbVie Inc., Medtronic Inc., Mylan Inc., Auxilium Pharmaceuticals Inc., Chiquita Brands International Inc., Horizon Pharma Inc., Applied Materials Inc., and Salix Pharmaceuticals Ltd. Wyden said the committee invited chief executives from inverted companies to testify; none would.
Under the Democratic plan, their deals would be unwound, renegotiated, or penalized.
AbbVie has agreed to pay $54 billion for Shire Plc., which is registered for tax purposes in the Channel Islands. Shire has 1,000 employees and 300 contractors in Chesterbrook. Auxilium has its headquarters in Chesterbrook but will shift its tax domicile to Canada after completing the acquisition of drugmaker QLT Inc.
Mylan is based in Canonsburg, near Pittsburgh.
Though not on the committee's list, Endo International was headquartered in Malvern until late 2013, when it purchased a Canadian company and reregistered in lower-tax Ireland.
The Treasury Department is "aware of many more inversions in the works right now" that are part of a race to the bottom on corporate taxes, said Robert Stack, deputy assistant secretary for international tax affairs.
Sen. Charles Schumer (D., N.Y.) said he supported the main Senate Democratic bill introduced by Michigan's Carl Levin, though he has concerns about a portion that would apply domestic tax rules to companies that are managed and controlled in the United States. Schumer, who said he also may offer his own bill, said the U.S. should focus on inverted companies' ability to take interest deductions and reduce their U.S. taxes even after the inversion.