Dozens of inversion deals are at risk of penalization by a top Senate Democrat's proposal to limit future deductions for companies that attempt to reincorporate overseas.
The proposal by Charles Schumer of New York, the No. 3 leader in the Senate's Democratic Majority, seeks to limit the amount of deductible interest for companies looking to change their tax address from 50 percent to 25 percent of U.S. taxable income.
President Barack Obama included a similar provision in his annual budgets. Mr. Schumer's proposal is the first time the language has appeared in a legislative proposal, according to New York-based independent corporate tax consultant, Robert Willens.
"It would have a very profound and immediate effect on these companies and would be very effective at reducing the attractiveness of inversions," Willens said. "This is certainly a political statement."
Mr. Schumer has yet to decide when he will introduce the proposal, according to one of his aides.
Medtronic Inc. and AbbVie Inc. are among several companies with pending inversion deals that would allow them to cut their corporate tax rates by moving their tax home outside the country by buying smaller foreign businesses.
Source: Rubin, Richard, "Schumer Anti-Inversion Tax Plan Could Reach Back to 1994," Bloomberg¸ September 7th, 2014