August recess has officially come and gone…
Roll up your sleeves and let's talk taxes. This week you heard about Apple being ordered to pay $14.5 billion in unpaid taxes to Ireland — the biggest tax ruling the European Union has ever made regarding a single company.
So what does Apple’s big tax bill have to do with your taxes?
Tax reform was already on the docket for 2017, but the European Union’s decision this week to enforce laws against company-specific tax breaks by its member states may increase the pressure for a broad tax overhaul.
Repatriating foreign earnings: American companies have over $2 trillion in foreign earnings overseas. The tax code allows them to defer paying a 35% corporate tax until the earnings are brought into the U.S. So, many companies keep foreign earnings abroad (to invest in international operations or research, buy foreign companies, or draw interest) rather than “repatriating” back to U.S. headquarters.
How Tax Inversions Work: With this tax approach, companies set up foreign divisions and “invert” their structure so earnings technically belong to the foreign company rather than the U.S. home office.
EU says Ireland broke law with Apple tax breaks: The European Union hit Apple with a $14.5 billion tax bill for its operations in Ireland, where a majority of its earnings were made by a “head office” with “no employees, no premises, no real activities.” The EU does not allow member countries to offer “state aid” (favorable tax treatment) to individual companies, and found that Ireland violated this by giving Apple unfair tax advantages from 2003-2014, during which the company paid 0.5% in taxes instead of the 12.5% required under Irish law. (Read letter to customers from Apple addressing these charges.)
Ireland doesn’t want the money: The EU does not have the power to levy fines, so it has ordered Ireland to recoup the $14.5 billion in back taxes from Apple. But Ireland does not want to collect the money and its finance minister has said it will appeal.
Many U.S. officials oppose the EU decision; still don’t like tax inversions: The Obama Administration and lawmakers on both sides of the aisles criticized the EU decision. In many cases, these same lawmakers have spoken out against tax inversions. (Remember, Apple CEO Tim Cook was called before a Senate tax panel in 2013 to discuss the company’s structure.) Policymakers say that the EU’s enforcement will reduce the amount of tax Apple eventually pays to the U.S. (since Irish taxes would offset the company’s U.S. tax burden). Read related Treasury Department report.
Sounds familiar because it is: Last November U.S. pharmaceutical company Pfizer announced record-breaking $160B merger with Irish pharmaceutical company Allergan. The deal was the largest inversion deal of its kind. In April, U.S. Treasury Department issued new rules, taking aim at tax inversions. Two days later, Pfizer and Allergan abandoned the deal, saying the decision was driven by new Treasury rules.
Gist: This isn't the first you're hearing about tax inversions and calls for reform (just check our archives), and it certainly won't be the last. House Republicans addressed inversions in their tax reform blueprint released in June. Senate Democrats are working on anti-inversion package. Keep an ear out this weekend with President Obama set to discuss the situation at the G-20 Summit.
On March 16, 2016, President Obama nominated U.S. Appeals Court Judge Merrick Garland to succeed Justice Antonin Scalia on the Supreme Court. 170 days later, there has been no Senate hearings or votes, and the nomination now stands as the longest waiting period for confirmation in history.
- California lawmakers voted to close "sentencing loophole" by mandating harsher penalties for sexual assault. Gov. Jerry Brown [D] has until the end of September to sign or veto the legislation.
- Michigan Senate panel approved four bills aimed at accelerating autonomous vehicle projects.
- Oklahoma Gov. Mary Fallin [R] announced Criminal Justice Reform Task Force. 17-member task force will submit recommendations to be considered during the 2017 legislative session.
- California General Assembly passed bipartisan bill to provide protections against surprise out-of-network medical bills. Florida enacted similar law earlier this year.
- U.S. Department of Transportation gave Oregon $2.1M to expand its "pay-by-the-mile" experiment as an alternative to gasoline tax.
- Sen. Chris Murphy [D, CT] walked across the state, holding town halls and sheltering from storms in an abandoned firewood box.
- Rep. Larry Buchson [R, IN-8] toured Angel Mounds, ancient community built by Mississippian Indians.
- Sen. Kirsten Gillibrand [D, NY] announced bipartisan legislation to establish Women's Suffrage Centennial Commission.
- Sen. Mark Kirk [R, IL] called on FDA to make emergency allergy treatments affordable and accessible.
- Rep. Tony Cárdenas [D, CA-29] penned a song to celebrate Dodgers games coming to tv.
- Rep. Erik Paulsen [R, MN-3] celebrated his daughter starting her senior year of high school with classic #TBT.
- Rep. Cheri Bustos [D, IL-17] visited local farm as part of rural economy tour.
- Reps. Fred Upton [R, MI-6] and Dan Kildee [D, MI-5] toured Flint, seeing the effects of the Flint water crisis.
- Sen. Tom Cotton [R, AR] met with Latvian President Raimonds Vejonis as part of week-long overseas trip.
- Sen. Chuck Schumer [D, NY] proposed voluntary cancer registry for firefighters, helping researchers better understand toxic building materials.
- Top Democrats on House Energy and Commerce Democrats called on Chairman Fred Upton to hold a hearing on Mylan's EpiPen pricing.
- USDA closed six offices following multiple anonymous threats.
- Senate Minority Leader Harry Reid said a Democratic Senate should move to curtail the filibuster.
- U.S. and China, world's biggest carbon emitters, set to formally join Paris climate agreement ahead of G-20 Summit.
- White House announced South by South Lawn, a festival of ideas, art, and action.
- Romanian hacker "Guccifer" was sentenced to 54 months in prison for computer hacking crimes.
- Treasury Secretary Jack Lew said TPP vote is still possible in lame-duck.
- White House said agencies saved $38B over five years thanks to regulatory review process.
- Mosquitoes in Miami Beach tested positive for Zika, marking the first time the virus has been found in insects in the mainland U.S.
That's it, folks. Enjoy the long weekend! We'll see you next week as Congress returns to the District. Expect Weekly Update in your inbox on Monday as we keep you in the know about bills and issues up for a vote in Congress.
— Whitney at POPVOX
Please keep in mind that highlighting a bill does not imply POPVOX endorsement in any way. As always, our goal is to offer one more way to help you stay informed about the complex U.S. legislative system.