Executive action on tax deals could come next week, Dem says

A senior Democratic tax writer said Friday that the Obama administration could take unilateral action targeting offshore tax deals before Congress leaves town for the midterm elections.

Rep. Sandy Levin (D-Mich.) said that Treasury Secretary Jack Lew told a group of House Ways and Means Democrats on Wednesday that the White House would roll out administrative actions against the recent influx of so-called inversions “when they’re ready.”

Lew has only said that the administration would decide in the “very near future” how to respond to the cross-border mergers, and that it would be preferable for Congress to pass legislation on the matter. Republicans and Democrats remain divided — even among themselves, in some cases — over how to respond to the deals, which allow companies to cut their tax bills by moving their address abroad.

Congress is currently grappling with a bill to fund the government past September and how to deal with President Obama’s request to arm and train Syrian rebels. But with voters heading to the polls in less than two months, lawmakers still hope to return to their states and districts as soon as the end of next week.

Experts are divided over how much power the White House has to limit inversions on its own.

But tax analysts generally think that Obama has more power to roll back the economic appeal of an inversion than to stop the moves altogether. In recent inversions, U.S. companies have often merged with smaller foreign competitors, reincorporating abroad in the process.

On Friday, Levin said that the Treasury Department’s actions would likely do more than just “nibble around the edges” and that it was important to put companies thinking about an inversion on notice. But he also made clear that, like Lew, he believes executive action will be no substitute for congressional action.

“I think the Treasury secretary has tried to temper expectations. That’s why he said Congress should act,” Levin said.

Any White House action, Levin added, “won’t get, in terms of the content, to the heart of the matter.”