Corporate Inversions Hearing Committee on Ways
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CORPORATE INVERSIONS HEARING BEFORE THE SUBCOMMITTEE ON SELECT REVENUE MEASURES OF THE COMMITTEE ON WAYS AND MEANS HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS SECOND SESSION JUNE 25, 2002 Serial No. 107–75 Printed for the use of the Committee on Ways and Means ( U.S. GOVERNMENT PRINTING OFFICE 81–550 WASHINGTON : 2002 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 VerDate Sep 04 2002 02:08 Oct 04, 2002 Jkt 081550 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 E:\HR\OC\C550.XXX C550 COMMITTEE ON WAYS AND MEANS BILL THOMAS, California, Chairman PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania WALLY HERGER, California SANDER M. LEVIN, Michigan JIM MCCRERY, Louisiana BENJAMIN L. CARDIN, Maryland DAVE CAMP, Michigan JIM MCDERMOTT, Washington JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin JIM NUSSLE, Iowa JOHN LEWIS, Georgia SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts JENNIFER DUNN, Washington MICHAEL R. MCNULTY, New York MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California WES WATKINS, Oklahoma KAREN L. THURMAN, Florida J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas JERRY WELLER, Illinois EARL POMEROY, North Dakota KENNY C. HULSHOF, Missouri SCOTT MCINNIS, Colorado RON LEWIS, Kentucky MARK FOLEY, Florida KEVIN BRADY, Texas PAUL RYAN, Wisconsin Allison Giles, Chief of Staff Janice Mays, Minority Chief Counsel SUBCOMMITTEE ON SELECT REVENUE MEASURES JIM MCCRERY, New York, Chairman J.D. HAYWORTH, Arizona MICHAEL R. MCNULTY, New York JERRY WELLER, Illinois RICHARD E. NEAL, Massachusetts RON LEWIS, Kentucky WILLIAM J. JEFFERSON, Louisiana MARK FOLEY, Florida JOHN S. TANNER, Tennessee KEVIN BRADY, Texas PAUL RYAN, Wisconsin Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occur- rences are inherent in the current publication process and should diminish as the process is further refined. ii VerDate Sep 04 2002 02:08 Oct 04, 2002 Jkt 081550 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 E:\HR\OC\C550.XXX C550 C O N T E N T S Page Advisory of June 18, 2002, announcing the hearing ............................................. 2 WITNESSES Connecticut Attorney General’s Office, Hon. Richard Blumenthal ..................... 46 Johnson, Hon. Nancy L., a Representative in Congress from the State of Connecticut ........................................................................................................... 15 McInnis, Hon. Scott, a Representative in Congress from the State of Colorado ................................................................................................................ 24 Maloney, Hon. James H., a Representative in Congress from the State of Connecticut ........................................................................................................... 27 Neal, Hon. Richard E., a Representative in Congress from the State of Massa- chusetts ................................................................................................................. 17 Salch, Steven C., Fulbright & Jaworski L.L.P ...................................................... 41 SUBMISSIONS FOR THE RECORD American Institute of Certified Public Accountants, Pamela J. Pecarich, let- ter .......................................................................................................................... 67 Doggett, Hon. Lloyd, a Representative in Congress from the State of Texas, statement and attachment .................................................................................. 5 Ingersoll-Rand, Hamilton, Bermuda, statement ................................................... 70 Moorehead, Donald V., and Aubrey A. Rothrock III, Patton Boggs LLP, state- ment ...................................................................................................................... 72 Thompson, Samuel C., Jr., University of Miami School of Law, Coral Gables, FL, statement ....................................................................................................... 7 Western Shower Door, Inc., Fremont, CA, Craig McCarty, letter ....................... 73 iii VerDate Sep 04 2002 02:08 Oct 04, 2002 Jkt 081550 PO 00000 Frm 00003 Fmt 0486 Sfmt 0486 E:\HR\OC\C550.XXX C550 VerDate Sep 04 2002 02:08 Oct 04, 2002 Jkt 081550 PO 00000 Frm 00004 Fmt 0486 Sfmt 0486 E:\HR\OC\C550.XXX C550 CORPORATE INVERSIONS TUESDAY, JUNE 25, 2002 HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, SUBCOMMITTEE ON SELECT REVENUE MEASURES, Washington, DC. The Subcommittee met, pursuant to notice, at 3:23 p.m., in room 1100 Longworth House Office Building, Hon. Jim McCrery (Chair- man of the Subcommittee) presiding. [The advisory announcing the hearing follows:] (1) VerDate Sep 04 2002 02:08 Oct 04, 2002 Jkt 081550 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HR\OC\C550.XXX C550 2 ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON SELECT REVENUE MEASURES FOR IMMEDIATE RELEASE CONTACT: (202) 225–7601 June 18, 2002 No. SRM–8 McCrery Announces Hearing on Corporate Inversions Congressman Jim McCrery (R–LA), Chairman, Subcommittee on Select Revenue Measures of the Committee on Ways and Means, today announced that the Sub- committee will hold a hearing on Corporate Inversions. The hearing will take place on Tuesday, June 25, 2002, in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 3:00 p.m. In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consider- ation by the Committee and for inclusion in the printed record of the hearing. BACKGROUND: As noted in announcing the full Committee hearing of June 6, 2002, in recent months several corporations have either changed their principal place of incorpora- tion to a foreign country or announced their intention to do so. On May 17, 2002, the U.S. Department of the Treasury released its Preliminary Report on Inversion Transactions that sets out the mechanics of and reasons for U.S. companies to un- dertake these transactions. The report also highlights the disadvantages that the U.S. Tax Code imposes on U.S. companies as compared to their foreign competitors. In announcing the hearing, Chairman McCrery stated, ‘‘Some say inversions are a problem which must be stopped. Others say they are a symptom of a greater prob- lem with our international tax rules. The Subcommittee hearing will give Members an opportunity to learn more about this complex problem and the consequences of proposed remedies.’’ FOCUS OF THE HEARING: The focus of this hearing is to build upon the full Committee hearing and further examine the mechanics of inversion transactions and examine policy options that will deter inversions and enhance U.S. international competition. DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: Please Note: Due to the change in House mail policy, any person or organization wishing to submit a written statement for the printed record of the hearing should send it electronically to [email protected], along with a fax copy to (202) 225–2610, by the close of business, Tuesday, July 9, 2002. Those filing written statements that wish to have their statements distributed to the press and interested public at the hearing should deliver their 200 copies to the Sub- committee on Select Revenue Measures in room 1135 Longworth House Office Building, in an open and searchable package 48 hours before the hearing. The U.S. Capitol Police will refuse sealed-packaged deliveries to all House Office Buildings. FORMATTING REQUIREMENTS: Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below. Any statement or exhibit not VerDate Sep 04 2002 02:08 Oct 04, 2002 Jkt 081550 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 E:\HR\OC\C550.XXX C550 3 in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee. 1. Due to the change in House mail policy, all statements and any accompanying exhibits for printing must be submitted electronically to [email protected], along with a fax copy to (202) 225–2610, in Word Perfect or MS Word format and MUST NOT exceed a total of 10 pages including attachments. Witnesses are advised that the Committee will rely on electronic submissions for printing the official hearing record. 2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All