New Jersey Senate would crack down on corporate inversions

Tax inversions are to some unpatriotic and unethical; they speak to the need for more loophole-thwarting regulations and tax reform. To others, the real threat to the U.S. corporate tax base is our corporate tax code itself, with the third-highest overall rate in the world and a worldwide system that requires American companies to pay a toll charge to bring their profits back home. Thus, the solution to the inversion “problem” is to dramatically cut the corporate rate and to move to a territorial tax system, not add even more unnecessary rules to an already complicated tax code.

Meanwhile, three measures in the New Jersey Senate that would crack down on corporate inversions by banning inverted companies from state contracts and other subsidies were voted out of committee Thursday, the latest move to stem the tide of companies pursuing mergers to reincorporate in tax-friendly jurisdictions outside the U.S.

In a 3 to 2 vote on Thursday afternoon, the New Jersey Senate State Government, Wagering, Tourism & Historic Preservation Committee passed bills S2397, S2361 and S2471, which would ban the award of state contracts other state subsidy grants to corporations that merge with foreign companies or shift their income abroad in order to avoid U.S. tax obligations.

New Jersey Sen. Shirley Turner, D-Mercer, who sponsored two of the bills said at the meeting that the measures are meant ensure that corporations who take advantage of the services and quality of life of this country pay their “fair share” of taxes. She pointed out that U.S.-based corporations are beneficiaries of the country’s educated workforce, transportation infrastructure and safety, among other advantages, that are made possible through taxes.

However, opponents of the bills expressed concern that punishing corporations for what amounts to a “paper move” will scare companies away from investing in the state and hinder job creation.

Under the bills, inverted corporations would be ineligible for state contracts, economic development grants and other types of financial aid including reimbursement of taxpayer-subsidized programs, such as Medicaid.

Turner also introduced a joint resolution calling on federal lawmakers and the President to enact the “Stop Corporate Inversions Act of 2014.”

“The increasing trend of corporate inversions is not just a Washington problem; it’s a New Jersey problem, too,” Turner said in a statement released Thursday. “When multi-billion dollar corporations shift their income abroad to reduce their U.S. corporate tax rate, the state can no longer tax those corporate profits. Every other taxpayer must then pay more to make up for the lost revenue in order to maintain government services. It’s no wonder the state can’t meet its financial obligations.”

The growing popularity of inversions has spawned backlash from the Obama administration, which in September  introduced several rule changes stripping away tax benefits of inversion deals. However, with legislative changes still necessary to completely shut down inversions, U.S. Treasury Secretary Jacob Lew said this month that the White House is not done looking at its administrative options.

Meanwhile, Senate Finance Committee Chairman Orrin G. Hatch, R-Utah, said last week that corporate tax reform that moves the country to a territorial system of taxation is the best solution to stop corporations from pursuing tax inversion deals.

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Martin Milita

Martin Milita is a Senior Director at Duane Morris Government Strategies, LLC. Duane Morris Government Strategies (DMGS) supports the growth of organizations, companies, communities and economies through a suite of government and business consulting services. The firm offers a range of government relations and public affairs services, including lobbying, grant writing; development finance consulting, media relations management, grassroots campaigning and community outreach. Milita works at the firm’s Trenton and Newark New Jersey offices. Visit his blog at: https://martinmilita1.wordpress.com Follow him on twitter: @MartinMilita1 https://www.facebook.com/martin.milita http://www.dmgs.com/ BLOGROLL Martin Milita – About.me Martin Milita :: Pinterest Martin Milita @ Twitter Martin Milita at Slideshare Martin Milita on Google+ Martin Milita Yola Site Martin Milita | Xing

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