WASHINGTON — Medtronic CEO Omar Ishrak was among the CEOs who declined to attend a U.S. Senate hearing Tuesday about the tax implications of mergers structured as “corporate inversions” in which an American company moves its legal address overseas.
The Twin Cities-based medical device maker announced last month that its planned merger with Covidien, an Irish firm, was structured as an inversion. The deal would potentially allow Medtronic to avoid paying US taxes on some of its overseas profits.
Lawmakers from both sides of the aisle are concerned about the growing number of such deals because of both the symbolic significance of firms shedding their American corporate citizenship and because of the potential tax revenue the government could lose out on.
“Let’s work together colleagues to immediately cool down the inversion fever. The inversion loophole needs to be plugged now,” said Oregon Sen. Ron Wyden, the Democratic chair of the Senate Finance Committee.
There’s little chance Congress will act quickly just days before a scheduled summer recess and ahead of midterm elections.
Many Democrats want to ban inversion deals retroactively to May — which would include Medtronic. DFL Sens. Amy Klobuchar and Al Franken have co-sponsored legislation to restrict the practice. Wyden and the Obama Administration would like any new laws to retroactively take effect from May 2014, which would likely sink the Medtronic deal.
But Republicans say any action on inversions should be in the context of an overhaul of the tax code and shouldn’t be used to punish companies.
“Whatever approach we take, it should not be retroactive or punitive,” said Utah Republican Sen. Orrin Hatch, the top Republican on the Senate Finance Committee.