Treasury Secretary Jack Lew told members of Congress Wednesday that he will announce a new administrative effort this week to stop corporate inversions, as attempts at legislation to stop companies from moving their headquarters out of the U.S. have failed.
Lew said in a letter to lawmakers that he would issue “additional targeted guidance to deter and reduce further the economic benefits of corporate inversions.”
Lew first took action to undercut the tax benefits of inversions in September 2014, announcing several specific rules meant to prevent companies from moving their headquarters abroad for tax purposes and limiting the tax breaks they could reap if they were successful in moving out of the country.
Wednesday’s letter did not indicate what further efforts the Treasury could take.
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Lew cautioned that only legislation could fully stop inversions, which are tax maneuvers in which U.S. companies merge with businesses in low-tax countries and then place the new headquarters of the combined company in the low-tax jurisdiction.
But he said that he had a mandate to take whatever administrative action he could to limit companies’ ability to undertake inversions. By moving their headquarters out of the U.S., he said, they avoid taxes but still enjoy the benefits of operating in America, “such as our rule of law, our skilled workforce, our infrastructure and our world-class research and development capabilities.”
Last year’s announcement was sufficient to cause some companies to call off their inversions. But it hasn’t completely stemmed the flow. In October, pharmaceutical giant Pfizer announced that it was in talks with Ireland-based Allergan about combining.
“Creative accountants and lawyers will continue to find new ways for companies to move their tax residences overseas and avoid paying taxes here at home,” Lew warned.
Rep. Sander Levin of Michigan, the ranking Democrat on the House Ways and Means Committee, welcomed Lew’s announcement.
“The fact that American companies, including Pfizer, continue to pursue inversions makes clear that additional steps are needed to stop this trend,” Levin said. “I am encouraged that Treasury intends to take additional steps to curb tax inversions, but also recognize that their authority in this area is not unlimited — as Secretary Lew noted today. Congress should get off the sidelines and take action to change the law to stop these tax-motivated inversions.”
