Ok, so, most sane people don't buy into the idiotic idea that corporations should have the same standing as people. But, right now, thanks to a majority of morons on the Supreme Court, that's the law. So, fine, then, while we try to close the loopholes on tax inversions, let's apply a similar standard: the law that says before renouncing U.S. citizenship, a person has to pay taxes on unrealized capital gains.
For those just checking in on the tax inversion scam, I've written a number of pieces about this (including here, here and here). In sum, quoting Citizens for Tax Justice:
The inversion crisis actually consists of three related problems which each call for specific solutions. First, loopholes in our tax law allow American corporations to pretend they are based abroad. Second, those corporations claiming to be based abroad (and corporations that really are based abroad) are able to use “earnings stripping” techniques to make profits earned in the U.S. appear to be earned in countries where they will be taxed more lightly or not at all. Third, the profits that American corporations earn offshore are supposed to be taxed by the U.S. when they are brought to the U.S., but after inverting corporations are able to use accounting tricks to escape that rule. The first problem is simply the absurdity that American corporations can pretend to be foreign corporations, while the second and third problems are the benefits they obtain by doing so.
Ok, so, that's the scam, and
there are plenty of solutions for the problem.
But, in the meantime, as CTJ cleverly points out yesterday:
Individuals and corporations are both allowed to defer paying U.S. taxes on key parts of their income. Under current law, wealthy individuals are required to give up this benefit when they renounce their American citizenship, while profitable corporations are not.
The tax code allows American individuals to defer paying income taxes on capital gains (appreciation of their assets) until they sell their assets. But wealthy individuals who renounce their U.S. citizenship lose this benefit and are required to pay tax on unrealized capital gains.
American corporations are allowed to defer paying income taxes on profits earned by their offshore subsidiaries until those profits are brought to the U.S., but under current law are not required to give up that benefit even after being acquired by a foreign owner. This more generous treatment of corporations has no apparent rationale and seems to be an accident of history rather than the intent of Congress.
Legislative history (explained below) suggests that Congress preserved deferral to help American multinational corporations compete with foreign-based multinational corporations. There is no reason to continue this tax break for corporations once they declare that they are no longer American.
Ending deferral in this situation would also remove a significant incentive for corporations to undergo inversions and could complement other legislative proposals to prevent inversions.[emphasis added]
Ok, so, you want to leave. Fine, here's the boot stuck up your ass. But, before we apply the boot, pay up--just like people do.