By Erin Delmore
And it’s a win for the Treasury Department. The Obama administration said Tuesday it’s imposing new regulations to keep companies from moving their headquarters — and their profits — overseas. It’s also a win for the Treasury Department.
It’s called “tax sheltering.” The companies? “Serial inverters.” Here’s how it works: Pfizer is the bigger company. It’s based in New York but employs more than 2,000 people in New Jersey. Allergan, the smaller company, is based in Dublin. Despite their relative sizes, Allergan was in the works to buy Pfizer, granting the company an Irish address and a passport to a lower tax rate. Great news for shareholders. For the U.S. Treasury, not so much.
“These earnings were earned here in the United States. They should be taxed here in the United States,” said Sen. Ray Lesniak.
But the pharmaceutical companies are crying foul, saying the Treasury Department changed the rules while the game was in play.
“We built this deal around the law, the regulations, all the notices that were put out by the Treasury, and it was a highly legal construct. We followed the rules that Congress had set for companies looking to moving to a foreign domicile,” said Allergan Chief Executive Brent Saunders.
Lesniak is working to close that loophole at the state level. His legislation would keep New Jersey companies from claiming their headquarters in other states.
“New Jersey stands to gain almost $300 million a year just by closing these corporate loopholes and getting these revenues which are supposed to be going to our state instead of being avoided by going to these tax havens outside the country,” Lesniak said.
Lesniak’s legislation is still with the Budget Committee. He told us he hopes to get it on the governor’s desk by the end of June.