The Obama administration said Tuesday it was reviewing potential administrative actions to limit stop companies' so-called tax inversion deals, after Sens. Dick Durbin (D-Illinois), Jack Reed (D-R.I.), and Elizabeth Warren (D-Massachusetts) sent a letter to President Barack Obama urging him to bypass Congress.
Most simply, tax inversions are mergers in which companies based in this case the U.S. acquire a country based overseas and shift their tax base, allowing them to enjoy a lower tax rate on profits made outside the U.S.
"Treasury is reviewing a broad range of authorities for possible administrative actions that could limit the ability of companies to engage in inversions, as well as approaches that could meaningfully reduce the tax benefits after inversions take place, to at least provide a partial fix," a Treasury Department spokesperson told Business Insider.
In their letter, the senators said the "growing trend in corporate tax avoidance" has created the need for immediate action.
"Inverted corporations take advantage of all the things American tax dollars provide — from tax credits for research and development, investments in transportation infrastructure, and strong patent and copyright protections, to profiting from taxpayer-supported programs like Medicare and the Veterans Health Administration," they wrote.
"Yet, these companies claim to be foreign corporations when it’s time to pay their tax bill—denying the United States billions of dollars in tax revenue and thereby increasing the tax burden on other U.S. taxpayers."
Tax inversions, and the proliferation of these tax-dodging mergers, have been one of the summer's biggest political and economic topics of discussion. Democrats have waded discussion of inversions into their agenda ahead of the 2014 midterm elections. The Obama administration has also pushed Congress to tackle the issue this year, even though legislative prospects appear dim.
In an interview with CNBC's Steve Liesman on July 25, Obama said companies moving overseas for tax reasons aren't "doing right by the country — and by the American people."
And on July 27, Treasury Secretary Jack Lew wrote in an op-ed in The Washington Post that tax inversions have been increasing at "breakneck speed," adding that "there is nothing wrong with cross-border merger activity... but these activities should be based on economic efficiency."
Some of the notable mergers announced in recent months include Minnesota-based Medtronic acquiring Covidien in a $42.9 billion deal that allows the company to move its tax base to Ireland, and Illinois-based AbbVie acquiring Shire in a $53 billion deal that will see the company move its tax base to the island of Jersey in the English channel.
We've written about explosion in tax inversions a number of times this year, highlighting this chart from Goldman Sachs, showing the unprecedented amount of pre-tax income potentially moving overseas.
See Also:This Map Shows The Wealthiest Person In Every State23 Things We Wish We'd Known Before Moving To New York CityMeet 'The Best Technology Reviewer On The Planet,' Who Is Only 20 Years OldNeil deGrasse Tyson: Here's How Long You Could Survive On Every Planet In Our Solar SystemApple Has Blown A $1 Billion Hole In Samsung's Business
SEE ALSO: MARK CUBAN: If Your Company Is Moving For Tax Reasons, I'm Selling Your Stock