WASHINGTON (AP) — While in Brussels for talks with European leaders in March, President Barack Obama held a little-noticed meeting with executives of a Belgian aerospace company. It was barely a footnote in a trip dominated by tensions with Russia over Ukraine.
But the meeting was the capstone of a lengthy courtship by the Obama administration and the state of Oklahoma to attract ASCO Industries to Stillwater, Okla., to build a new $125 million production facility.
The effort was part of an initiative called SelectUSA that Obama started in 2011 and expanded last year.
Obama this week is drawing new attention to the effort, convening business leaders Tuesday at the White House to advertise success stories in the face of continuing public anxieties over jobs and the economy.
Yet as Obama promotes the influx of foreign investment to the U.S., his administration and key members of Congress are also fretting over dozens of U.S. companies heading in the other direction. These businesses are merging with or acquiring overseas companies to change their address and gain tax advantages that can cost the federal government billions in tax revenues.
The most prominent example is Pfizer Inc.'s recent takeover attempt of British drugmaker AstraZeneca, a deal that if consummated would be the largest-ever foreign takeover of a British company. The potential acquisition would allow Pfizer to incorporate in Britain and thus limit its exposure to higher U.S. corporate tax rates. On Monday, AstraZeneca turned down Pfizer's latest offer of $119 billion, making the likelihood of a deal increasingly unlikely.
Pfizer's approach — called a corporate inversion — is the latest in a growing trend that could accelerate as corporate lawyers advise clients to get ahead of efforts in Washington to overhaul the tax system and close corporate loopholes. Companies that have created foreign shell corporations in recent years include familiar names like Tyco International and Ingersoll-Rand.
Though there is little chance of action this year, Republicans and Democrats generally agree that federal corporate tax rates, now at 35 percent, should be lowered while eliminating credits, exemptions and other tax advantages.
Still, the Obama administration's 2015 budget contained a specific proposal aimed at curtailing inversions and White House officials say such a fix would not necessarily have to be part of a broader overhaul.
In the Senate, Democratic Sen. Carl Levin of Michigan says he will propose legislation soon. Sen. Ron Wyden, the Democratic chairman of the tax-writing Senate Finance Committee, says he also has a plan to deal with inversions, but wants it to be part of more comprehensive tax legislation.
Under current law, a U.S. company that merges with a foreign entity can't benefit from a lower foreign tax rate unless the shareholders of the foreign company own at least 20 percent of the new merged business. Obama has proposed raising that threshold to 50 percent, with the goal of making them less attractive.