Medtronic quietly hired former senators John Breaux (D-LA) and Trent Lott (R-MS) and three others as lobbyists to combat anti-inversion legislation as political anger over the tax-saving method mounts, threatening the company's planned merger with Covidien. A lobbying disclosure report specifically mentions the Stop Corporate Inversion Act of 2014 before the Senate Finance Committee as a target for the Breaux Lott Leadership Group—which includes Breaux, formerly a Democrat senator from Louisiana, and Lott, formerly a Republican senator and majority leader from Mississippi. Both former senators used to sit on the committee, according to Citizens for Responsibility and Ethics in Washington, which reported on the lobbying disclosure last week.Norm Ornstein, a congressional expert at the American Enterprise Institute, called Medtronic’s hiring of Breaux and Lott an investment of “minibucks” in lobbying “to save megabucks from their tax bills.” In fact, Medtronic’s $43 billion acquisition of Covidien would be the largest "tax inversion" deal yet.The tax inversion deals, which have been termed the “holy grail of tax avoidance” by a number of U.S. politicians, have been picking up recently as a growing number of companies look for ways to reduce their tax burden. As many as 25 U.S. companies are considering relocating their headquarters to low-tax destinations, according to the Irish Times. The corporate tax rate in the United States is 35%—the highest nominal rate in the world, leading a number of companies to look for new domiciles in low-tax nations such as Ireland, the United Kingdom, Switzerland, and the Netherlands.Upon closure of the $43 billion acquisition of Ireland's Covidien in late 2014 or early 2015, Medtronic plans to shift its tax domicile to that country to save an estimated $4 billion in taxes annually and enable it to access its roughly $12 billion in offshore capital without paying U.S. taxes. Medtronic CEO Omar Ishrak has stressed other motives behind the transaction and has promised the combination will result in an additional $10 billion in technology investments in the U.S. over 10 years.He defended the Covidien purchase during a recent interview with CNBC: "What I do know is for us, the structure with Covidien was first and primarily driven by strategy from a healthcare perspective, in that together we could provide more value to the healthcare system and be a much more effective combination. And then once we determined that, then we assessed the most efficient structure through which we can operate more effectively as a company."However, inversion is clearly an important element of the deal, for the Times reports that there is a termination clause in the agreement which says (in many more words) that either company can kill the upcoming marriage due to changes in the inversion rules. If the deal falls apart, Medtronic would owe Covidien a breakup fee of $850 million, but the Wall Street Journal says the payment is not required if the divorce occurs due to changes in the tax code.In a recent speech in Los Angeles, Obama said, without naming names, that companies looking to move their headquarters offshore for tax benefits are “technically renouncing their U.S. citizenship.” The Financial Times also quoted the President as saying: “My attitude is: I don't care if it's illegal. It's wrong... You don't get to pick the rate you pay.”
Democrats in both chambers of Congress agree and are supporting a law to limit such deals in the future. One bill, supported by U.S. Treasury Secretary Jacob Lew, would be retroactive to May of this year, potentially affecting the Medtronic–Covidien deal. Recently, four senators introduced a plan known as the "No Federal Contracts for Corporate Deserters Act," to make such deals less attractive. A number of Republicans also have expressed their disfavor for such tax deals but don’t agree with Democrats on how to address the issue.
The chances of Congress passing that legislation in the near future, however, are limited.
FIND 
Submit 
SPEAK TO THE 
FIND 
Note: Search Jobs by tilte.