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Obama seeks to close one of ‘most insidious tax loopholes’

Richard Rubin | Wall Street Journal

President Barack Obama renewed his call for Congress to limit corporate tax inversions, one of the “most insidious tax loopholes out there,” a day after his own Treasury Department imposed its toughest curbs yet and endangered the largest-ever such deal.

The Treasury Department on Monday released its third and most far-reaching set of rules to combat corporate inversions, transactions in which U.S. companies take a foreign address, often through a merger with a smaller company.

The latest regulations, which target “serial inverters” and post-inversion moves to reduce U.S. taxes, are threatening the largest inversion ever, Pfizer Inc.’s planned merger with Allergan PLC. The companies have said they are reviewing Treasury’s actions and haven’t announced what they will do.

Mr. Obama said the U.S. should revamp the tax code and lower the corporate tax rate. That idea has been stalled in Congress because of disagreements over what breaks should go away and what should happen to individual tax rates. Republicans object to specific stand-alone anti-inversion legislation backed by Mr. Obama, saying the entire tax system should be addressed together.

The problem, the president said, isn’t necessarily that companies are engaging in illegal activity, but what’s legal in the first place.

“Only Congress can close [the door to inversions] for good and only Congress can make sure that all the other loopholes that are being taken advantage of are closed,” Mr. Obama said.

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