White House officials said U.S. President Barack Obama will call for an end to a corporate loophole that gives companies a way to avoid taxes by reincorporating overseas, a practice known as inversion.
The president plans to make these comments during a three-day fundraising swing for Democrats in Los Angeles during a discussion regarding the economy that will take place at Los Angeles Technical College.
Inversions occur when a U.S. company acquires or sets up a foreign company and then shifts its U.S. tax domicile to the foreign company, typically located in a lower-tax country.
The transactions have been occurring at a rapid pace with nine inversion deals having been agreed to this year and more under consideration.
Democrats have offered several suggestions to decrease the use of inversions, with one solution being to put foreign earnings out of the reach of the Internal Revenue Service. The president is likely to throw his support behind the Democratic bills, calling any company with half of its business in the United States to be U.S. domiciled.
"We have seen increased activity from companies in the inversion space and as a result the president's view ... is that we should be acting as quickly as possible," a White House official told reporters on a conference call.
"That will buy us more time and space to ... reform our tax code as a whole."
While Republicans acknowledge the need for a change in regards to inversions, many prefer that such changes be part of an effort to reform the U.S. tax code.
The White House disagrees, stating urgency as a factor.
"We can't afford to wait to reform our tax code completely to deal with inversion," the official said, adding that such deals would cost the United States an estimated $17 billion in revenue over the next decade.
Source: Roberts, Joshua, "Obama Presses to Close Corporate Tax Loophole 'Inversions,' Reuters, July 24th, 2014