Mr. Secretary, Take the Tax Juice Out of Corporate Expatriations

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Mr. Secretary, Take the Tax Juice Out of Corporate Expatriations

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Title: Mr. Secretary, Take the Tax Juice Out of Corporate Expatriations
Author: Shay, Stephen E.
Citation: Stephen E. Shay, Mr. Secretary, Take the Tax Juice Out of Corporate Expatriations, 144 Tax Notes 473 (July 28, 2014).
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Abstract: The lack of government response to the current wave of tax-motivated corporate expatriations is disheartening. Senate Finance Committee Chair Ron Wyden, D-Ore., Sen. Carl Levin, D-Mich., and Rep. Sander Levin, D-Mich., are to be praised for their leadership on this issue; however, in the current political environment there is little reason to believe that a statutory solution will be enacted. One looks in vain at the tax press each day to see what action is being taken, not just talked about, and as of this writing, nothing has been done. This article demonstrates that it is not necessary for Treasury to wait for Congress to act on corporate expatriations.

This article describes the principal tax benefits companies seek from expatriating and outlines regulatory actions that can be taken without legislative action to materially reduce the tax incentive to expatriate. These proposals for regulations are supported by existing statutory authority. They would be good policy and consistent with, or easily integrated with, publicly proposed tax reform proposals.

One of the Treasury secretary’s most important responsibilities is the health of the tax system under the laws adopted by Congress. Congress has given Treasury broad and in some cases sweeping authority to adopt regulations, including specific grants of authority that bear on issues at the heart of corporate inversions. The proposals here are just one set of alternatives available to Treasury that could powerfully affect the incentive to expatriate. Others no doubt have improvements to these or other alternatives to propose; however, when a material portion of the U.S. corporate tax base is at risk, doing nothing borders on the irresponsible.
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