With two Illinois companies – AbbVie ABBV +2.53% and Walgreen – considering a move to more tax-friendly countries in Europe, U.S. Sen. Richard Durbin (D-Ill.) plans to introduce legislation this week to close tax loopholes for corporations that take jobs out of the country.
The Chicago Tribune reports. The “Patriot Employer Tax Credit Act” would closing a loophole that allows companies to claim tax savings for activities such as building a manufacturing plant overseas. To qualify, a company must maintain corporate headquarters in the U.S., maintain the same number or increase the number of U.S. workers compared with the number overseas and provide health insurance.
Durbin announced the “Patriot Employer Tax Credit Act” at Wheatland Tube in the Back of the Yards neighborhood. He plans to introduce the measure Thursday, a spokeswoman said.
The proposal would give tax credits to companies “that provide fair wages and good benefits to workers while closing a loophole that allows corporations to claim tax savings for activities such as building a manufacturing plant overseas,” according to a news release from Durbin’s office.
To qualify for the credits, a company must maintain its corporate headquarters in the U.S., maintain the same number or increase the number of U.S. workers compared with the number overseas and provide health insurance benefits that comply with the Affordable Care Act.
Durbin’s bill faces long odds, since it’s unlikely the Republican-controlled House of Representatives would agree to such measures.
His proposal comes as two of his major home-state employers, Walgreen Co. and AbbVie Inc. are said to be considering moving their headquarters to lower-tax countries, a maneuver known as an inversion. Such deals allow corporations to retain much of their infrastructure in the U.S., including executive offices, while cutting their corporate tax rates by officially domiciling elsewhere.
Deerfield-based Walgreen is facing increasing shareholder pressure to re-domicile in Europe after it completes its expected takeover of Swiss-based Alliance Boots GmbH, largely to take advantage of lower taxes.
AbbVie, the North Chicago pharmaceutical firm that spun off from Abbott Laboratories in early 2013, said last week its $46.3 billion takeover offer made to Irish company Shire PLC was rejected in late May.
Separately on Monday Shire highlighted the promise of existing and new drugs as evidence that AbbVie’s offer undervalued the company.
Chief Executive Flemming Ornskov said current products would generate sales of at least $7 billion by 2020, with $3 billion more coming from drugs still in the pipeline.
Shire also said that in the medium term it expected sales of $6.5 billion by 2016. The company, best known for hyperactivity and rare-disease drugs, had said on Friday it was aiming to more than double sales to $10 billion by 2020 without giving details.
Analysts said the confident performance may encourage AbbVie to dig deeper. Analysts at Jefferies estimated the U.S. company could make the deal pay at a price of up to about or $55 billion.
AbbVie on Monday also raised its 2014 adjusted earnings forecast, citing strong “business performance” that it expects to continue for the rest of the year.
The company now expects 2014 adjusted earnings of $3.06 to $3.16 per share, up from its prior view of $3.00 to $3.10.