WASHINGTON, D.C. – U.S. Senator Angus King (I-Maine) today joined with thirteen of his colleagues to introduce legislation that would tighten rules on corporate tax avoidance through so-called “inversion”, the practice of shifting a corporation’s tax residence overseas through acquisition of an offshore company to avoid paying U.S. income taxes. The Stop Corporate Inversions Act of 2014 would effectively impose a two-year moratorium on inversions to prevent the loss of billions of dollars in revenue, which would either add to the deficit or to the tax burden placed on the American taxpayers.

“The practice of inversion is, in reality, nothing short of lawful tax evasion and is further proof that companies are exploiting the tax code to dodge paying their share of taxes,” Senator King said. “Without a doubt, the long-term solution to this problem is fundamental and comprehensive tax reform, but with our national balance sheets deep in the red, we literally cannot afford to allow companies to take advantage of loopholes like this to shirk their financial responsibilities. Our legislation sends a strong message to corporations that the American people won’t tolerate this abuse any longer and that they refuse to shoulder the financial burden of these troubling practices.”

Under current law, U.S. companies can “invert” and avoid paying U.S. income taxes if they merge just 20 percent of their stock to shareholders of an offshore company. The bill introduced today, which is similar to a proposal in the President’s Fiscal Year 2015 submission, would raise that threshold to 50 percent so that if the majority of a company’s stock remains in the hands of the U.S. company’s shareholders, then it is treated as a U.S. company for tax purposes. It also would prohibit companies from shifting tax residence offshore if their management and control and significant business operations remain in the United States. The two-year moratorium is achieved through a two-year sunset provision designed to provide time for Congress to work on bipartisan, comprehensive corporate tax reform.

Companion legislation has also been introduced in the House of Representatives by Rep. Sander Levin, the Ranking Member on the House Ways and Means Committee.

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