The Treasury Department could act as soon as next week to stop companies from moving their headquarters out of the U.S. for tax purposes, a top Democratic tax lawmaker said Friday.
“They’re preparing to act and they’ll act as soon as they’re ready,” said Rep. Sander Levin, the ranking Democrat on the House Ways and Means Committee, which has jurisdiction over tax issues.
Treasury Secretary Jack Lew spoke with Levin on Wednesday, the congressman said, and explained that he would not necessarily wait for Congress to go home before taking unilateral action. “He said they would act as soon as they were ready, so that could be next week,” the Michigan Democrat said at a press event hosted by the Christian Science Monitor.
With his brother, Sen. Carl Levin, D-Mich., Levin has written legislation to tighten the rules restricting so-called tax inversions, which are tax maneuvers in which U.S. businesses buy a company in a low-tax country to move their headquarters there.
As the number of companies seeking such deals has accelerated over the year, including most recently Burger King’s deal with Tim Hortons to move its headquarters to Canada, the Obama administration and lawmakers have raised the alarm over the possible consequences to the U.S. tax base.
Facing congressional inaction, Lew in August began reviewing possible administrative actions that would reduce the tax benefits from inversions. The Treasury has not specified what those measures would be, although tax experts have proposed several possibilities.
“What they will do I think is uncertain,” Levin said. He added, though, that “what they issue is something that he believes is sound policy and is within the authority of the secretary of the Treasury.”
Levin said, as Lew has, that executive action is not a substitute for legislation on inversions.
“They can more than nibble around the edges, but it won’t get, in terms of the content, to the heart of the matter,” Levin said. He added that Lew has had to “temper expectations” in recent days about how far-reaching Treasury action can be.
Top congressional Republicans, including House Speaker John Boehner and Senate Finance Committee ranking member Orrin Hatch, have warned that they believe any Treasury measure that would be effective in preventing further inversions would likely lie beyond Lew’s authority.
Nevertheless, Congress is unlikely to act in the few remaining legislative days left before the pre-election break begins. Senate Majority Leader Harry Reid has indicated he does not plan to bring up anti-inversions legislation during that time.
