Top Democrats in the House and Senate are backing a measure that would deny coronavirus aid to companies that moved their official headquarters offshore to avoid U.S. taxes.
The legislation, scheduled to be released Wednesday, would block companies that engage in so-called corporate inversion transactions from participating in the Federal Reserve’s emergency lending programs. It would also block them from taking advantage of new tax breaks for business losses and interest payments.
The legislation would give companies the option to qualify for the relief money if they revert to a U.S. company, which would require them to retroactively be treated as a domestic corporation beginning in 2017, paying back taxes and penalties for those years.
The proposal, which doesn’t yet have any Republican sponsors, could be a longshot to be included in the next stimulus bill, which lawmakers are considering in July.
“These companies, which have schemed their way out of paying U.S. taxes, shouldn’t get a dime of American taxpayer-funded CARES Act financial relief,” Illinois Senator Dick Durbin, a Democrat, said in a statement.
Texas Representative Lloyd Doggett, the sponsor in the House, also said that companies which renounced American citizenship “want to be treated as foreign when it comes time to pay for vital services, but claim they are as American as apple pie when it comes time for a handout paid for by the American households actually suffering.”
Congress passed a $2.2 trillion stimulus bill known as the CARES Act in March to bolster U.S. households, small businesses, and large corporations from an economy reeling from shutdowns to slow the spread of the coronavirus. The legislation has helped buoy struggling businesses, but the quickly negotiated bill created some openings for companies to access money that lawmakers said in hindsight should have been more restricted.
The U.S. central bank in guidance for two bond buying programs allows U.S. subsidiaries of foreign companies, which includes inverted companies, to qualify for the public money. Whether any companies that have left the U.S. have benefited from Fed lending isn’t clear.