Archive for the ‘Congress’ Category

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In a move apparently to be more progressive and inclusive, Burger King recently changed its motto from “have it your way” to “be your way.” It’s good the company is trying to be more inclusive, but, the company’s recent decision to merge with Tim Hortons and move its headquarters to Canada which reportedly could score tax reductions for the company, is the opposite of progressive, it’s downright regressive.

By merging with Tim Hortons and reincorporating as a new company in our neighbor to the north, Burger King is deserting its American consumer base, leaving average citizens to pick up the tab for the lost taxes from a profitable U.S. business. A business that will continue to operate in our country, have management and workers here, despite becoming on paper a foreign entity.

The whopper of a tax move is called an “inversion” and it is a way for a company to transfer headquarters on paper to another county with lower tax rates or other policies that reduce the amount of U.S. taxes a corporation pays. Dozens of corporations have done it in recent years, and more have deals currently in the works. Each new company announcing its intent to defect to a foreign tax jurisdiction fans the flames of consumer displeasure.

Recently, America’s largest drugstore chain, Walgreens, made a tactical retreat and dropped plans to reincorporate after merging with a Swiss company in order to invert. After shoppers and activists united in calling on the company to stay true to its U.S. roots and pay its fair share of corporate taxes, Walgreens decided to keep its headquarters (and tax contributions) here in America.

Given all the rightful criticism of American people and press to the problem of inverted companies, it was welcome news when the U.S. Treasury Department announced last week that it is taking some small but positive steps that went part of the way toward addressing inversions. Treasury did that by limiting economic incentives of these inversion deals. The changes to the interpretation of the tax code took away some of the benefits of inversions like ending some types of subsidiary loans, restructuring deals, and cash and property transfers.

Currently, under the tax code, when companies merge and reincorporate in another country but retain 80 percent of their previous shareholders, they are classified as “inverted” under the tax code. That means the inverted company is treated as domestic for tax purposes and is not able to escape paying its fair share of taxes. The new changes from Treasury tighten up the “80 percent rule” by ensuring that companies aren’t able to artificially shrink via dividend payouts or grow by counting passive assets like cash in order to squeak in below the 80% previous shareholders threshold.

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Congressmembers on both sides of the aisle yesterday joined forces to pass the so-called “Jobs for America Act” (H.R. 4).

In the vote, 221 Republicans and 32 Democrats matched the absurd anti-regulatory rhetoric of the U.S. Chamber of Commerce and other Big Business groups with absurd anti-regulatory policy. The bill contains provisions designed to stifle, stall, shrink and stop safeguards the public relies on and includes the text of familiar deregulatory bills like the Regulatory Accountability Act and the REINS Act (which the House already has voted on). If enacted, H.R. 4 represents a green light allowing reckless corporations to do simply whatever they want with as little oversight as possible.

Big Business groups have been making hyperbolic claims about regulations killing jobs – and the inverse claim that gutting regulation will create jobs – for decades. The predictions never come true.

Consider the following examples from Public Citizen’s recent report:

  • 1974: The Occupational Safety and Health Administration bans the carcinogen, vinyl chloride. The plastics industry claimed that the OSHA regulation would kill 2.2 million jobs. Those claims were proven completely false. A new way to manufacture vinyl chloride was developed within a year without any jobs lost.
  • 1975: The National Highway Traffic Safety Administration increases the fuel efficiency standard. Industry reports warned that 1.5 million jobs would be lost. By 1985, automakers had met the higher standard without losing any jobs.
  • 1990: The Environmental Protection Agency sets new pollution standards under the Clean Air Act. Business Groups responded with doomsday hysterics, claiming up to 2 million jobs would be lost. Those were proven entirely wrong. Instead, according to the Investor’s Business Daily, “Pollution has been falling across the board for decades, even while the nation’s population and economy have expanded.”
  • 1995: EPA removes lead from gasoline. Monsanto claimed 43 million jobs would be killed. The removal of lead is now considered one of the biggest public health success stories while gas prices did not dramatically increase and no jobs were lost.

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The Permanent Subcommittee on Investigations has weighed in on the progress the Internal Revenue Service (IRS) has made after last years’ “scandal,” and the majority is advocating bright line rules for political activity for nonprofits.

Committee members criticized the current facts and circumstances test and called for its replacement, lending their voice to the many nonprofits and citizens that have been calling for a bright-line definition of political activity applicable to all nonprofits. Such a rule would make it easier for nonprofits to engage in our democracy without fear of jeopardizing their nonprofit status.

“The facts and circumstances test used by the IRS was criticized as difficult to administer by every IRS official interviewed,” says the report.  It goes on to say that the test “produced subjective and inconsistent decisions on applications.”

The minority staff filed a separate report, and did not discuss the facts and circumstances test or provide recommendations for the future. The full report is available here.

The IRS is currently engaged in a rulemaking that could provide the sort of easily administered definition the report – and Public Citizen’s Bright Lines Project – calls for. A new draft of the rules is expected early next year.

Emily Peterson-Cassin is the Bright Lines Project Coordinator for Public Citizen’s Congress Watch division

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One year ago today, the Senate passed Resolution 202, establishing National Whistleblower Appreciation Day on July 30. Passage of Resolution 202 was led by Senators Chuck Grassley (R-Iowa) and Carl Levin (D-Mich.) and was passed by unanimous consent.

Truly remarkable in this era of partisan rancor.

And it’s not just Congress that sees the importance of this issue. The Obama administration has also been doing its part to increase whistleblower protections for those who disclose waste, fraud and abuse. On November 27, 2012, President Obama signed into law the Whistleblower Protection Enhancement Act (WPEA). The WPEA provides millions of federal workers with the rights they need safely to report government corruption and wrongdoing.

President Obama also has issued Presidential Policy Directive 19 (PPD-19), which extends whistleblower protections to the federal government’s intelligence community employees. The directive provides for reinstatement, compensatory damages, restoration of back pay and other remedies in cases where retaliation for whistleblowing is substantiated.

PPD-19 is great news for direct employees of the federal government. However, it fails to offer or extend any whistleblower protections to employees of intelligence community contractors, like Edward Snowden.

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This week the U.S. Senate Committee on Finance held a hearing entitled “The U.S. Tax Code: Love It, Leave It, or Reform It!” where the focus was on the corporate tax maneuver called inversions.

Inversions occur when corporations purposely renounce their American citizenship, usually by merging with a foreign corporation and reincorporating in a low- or no-tax country (also called a tax haven) in order to be treated as a foreign corporation and escape U.S. tax liabilities. However, in reality, the move is just on paper — these corporations can in fact be owned by up to 79 percent of the former shareholders of the U.S. company and keep their business operations here in America.

U.S. Senator Ron Wyden (D-Oregon), chairman of the Finance Committee, referred to tax inefficiencies and loopholes like inversions as “chronic diseases,” “infections” and “contagions” since they are eroding the U.S. tax base and allowing these multinational corporations to escape paying their fair share of government services. The exact words of Sen. Wyden were: “The inversion virus now seems to be multiplying every few days.”

There has definitely been a growing rash of attempted inversion deals. The largest inversion deal to date, the drug maker AbbVie (formerly Abbott Laboratories) recently agreed to purchase a European competitor, Shire, with the goal of reincorporating in Britain. Other health-related companies have announced plans to invert such as Medtronic, Pfizer and Mylan.

Even “America’s drugstore” – Walgreens — may soon be a Swiss company, as it is in the process of determining whether to reincorporate there. This decision is particularly virulent since Walgreens receives around a quarter of its income from taxpayer supported health programs like Medicare and Medicaid. (The full list of companies that have inverted can be found here, which is much broader than the recent spate of health-related defections.)

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