After leaving the Senate almost a decade ago, former Sens. Trent Lott (R-Miss.) and John Breaux (D-La.) have been hired to help a multibillion-dollar company evade income taxes by working to block legislation aimed at closing corporate tax inversion loopholes, Bloomberg reported last week.
Medtronic Inc., the world's fourth largest medical device company, paid Breaux-Lott Leadership Group -- a firm led by the former lawmakers -- $200,000 in June to lobby against Sen. Carl Levin's (D-Mich.) Stop Corporate Inversion Act of 2014.
The measure, which would effectively kill Medtronic's $43 billion acquisition of Irish medical device company Covidien, would reduce a loophole that allows corporations to shirk income taxes by moving their corporate headquarters to countries with lower tax rates than the U.S.
The New York Times reports:
Medtronic would reincorporate in Ireland but maintain its headquarters in Minneapolis. Such an inversion would allow it to be treated as a foreign company after the transaction. The move would lower Medtronic's tax rate and, perhaps more important, allow the company to access its $12 billion in cash held abroad without paying United States taxes.
The inversion, a tactic President Barack Obama recently condemned as "unpatriotic," could save Medtronic $3.5 billion to $4.2 billion in U.S. taxes, according to the Star Tribune.
"Right now, a loophole in our tax laws makes this totally legal -- and I think that's totally wrong. You don't get to pick which rules you play by, or which tax rate you pay, and neither should these companies," Obama said in a July speech. "Rather than double-down on the top-down economics that let a fortunate few play by their own rules, let's embrace an economic patriotism that says we rise or fall together, as one nation, and as one people."
According to analysis of the company's public filings by the Star Tribune, Breaux and Lott are tasked with undermining inversion legislation that could foil the proposed Medtronic-Covidien.
"Medtronic routinely employs outside counsel to represent its interest to public policymakers," a Medtronic spokesman said Wednesday in a statement to the Star Tribune. "This firm was hired to provide public policy representation and was disclosed fully as required. Our position is we can't speculate on what might happen but continue to follow the discussions in Washington, D.C., closely and are actively engaging with policymakers on the issues related to our proposed acquisition."
Meanwhile, the Stop Corporate Inversion Act, along with similar measures in the House, has been stalled in Congress, prompting the Obama administration to search for viable executive actions to address the issue.
Overall, 76 U.S. companies have inverted since 1983, according to the Congressional Research Service. Fourteen have done so this year alone.
The Joint Committee on Taxation estimates that House legislation that would prevent American companies from reincorporating overseas would save the U.S. tax base $20 billion over 10 years.
(h/t Minneapolis Star Tribune)
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