White House exploring ways to stop Medtronic-like tax avoidance

Wikimedia Commons/Bobak Ha'Eri

This will make the House GOP’s “impeachment caucus” heads explode. The AP says President Obama is looking for a way to blow by Congress and kneecap corporate tax avoidance maneuvers like the one used by Medtronic, known as inversions. “Senate Democrats have pointed to a paper published last week by Stephen Shay, Harvard Law School professor who was a Treasury official earlier in Obama’s presidency. Writing in the trade publication Tax Notes, Shay argued that the Treasury could weaken the benefits that entice companies to pursue inversions. As an example, after a company reincorporates overseas, it typically shifts large amounts of debt from the foreign company to the U.S. subsidiary, which can then deduct that debt when it files taxes. Shay said [Treasury Secretary Jacob J.] Lew could use regulations to start treating that debt as equity, which can’t be deducted.”

It’s good to see something getting done. Don Davis of the Forum News Service reports, “The U.S. Army Corps of Engineers has approved a storage facility that could ease a second straight winter propane shortage. U.S. Sen. Amy Klobuchar, D-Minn., said the corps approved the 1 million-gallon facility at ‘record speed’ so it will be ready for this fall’s harvest. However, Klobuchar said while touring Farmfest exhibits that the facility will only make up a third of the propane transportation capacity lost when the owners of a pipeline decided to no longer move propane through it. She said shortages are expected again this year.”

Know someone desperate for a campaign issue? The AP tells us, “The state of Minnesota says it has sold $85.4 million in bonds to pay for a new Senate office building. Minnesota Management and Budget announced the bond sale Tuesday. State officials said earlier they would start on the four-story building near the Capitol within a few days of the sale.”

Tom Scheck at MPR adds, “April estimates said taxpayers will pay for $77 million of the project. Capitol complex parking fees will pay for the remaining $13 million. Department of Administration spokesman Curt Yoakum said the final numbers are being changed as a result of the bond sale. He said he expects the construction cost of the building to go down and the parking facility fees to increase. Yoakum said the numbers will be finalized after construction firms bid on the project. Yoakum says construction crews will start with perimeter fencing, asphalt, curb and tree removal and heavy equipment staging.”

Was that really so difficult?  Jim Spencer at the Strib says, “Target Corp. has for the first time come out publicly in support of gay marriage, as a growing number of high-profile businesses take positions on the divisive issue. In revealing Tuesday that it had signed a court brief backing marriage equality in a ­pending court case, Target joins other blue-chip names such as Starbucks, Apple and Intel that have sided publicly with same-sex marriage advocates in court cases or ballot issues.”

Sort of a Sun City, without as much sun. MPR’s Elizabeth Baier reports, “A few blocks away from the Mayo Clinic’s flagship campus, a project is underway that signals big changes ahead for the city’s housing mix. Construction workers are putting finishing touches on the exterior of one of Rochester’s newest senior living communities. Slated to open this fall, the mixed development of assisted living apartments and a memory care unit is part of a boom in senior housing.”

Thank you, Fil. Cassie Hart of KSTP-TV reports, “A 9-year-old Inver Grove Heights girl opened up a lemonade stand Sunday to help the family of fallen Mendota Police Officer Scott Patrick. Fil Sans sold lemonade, freezies and rainbow loom bracelets at her stand on Blaine Avenue. She was able to meet her goal Tuesday of $2,231, in honor of Officer Patrick’s badge #2231.”

Some of the biggest individual parts of the new Vikings stadium are being hoisted in to place this week. Tim Nelson of MPR says, “A crane moved a 400,000-pound steel roof section into place at the new Vikings stadium today, as the new building starts to take shape in the Minneapolis skyline. The building will rise about 300 feet above the ground when complete. One of the world’s biggest mobile cranes is on the site, hoisting the stadium structure onto shoring towers. Michele Kelm-Helgen, chair of the Minnesota Sports Facilities Authority, said the structures going up in coming days will weigh hundreds of tons and will span over the length of the new football field.” Just think, in no time at all, they’ll be spraying confetti from up there all over the Super Bowl champion Minnesota Vikings.

A bit more on CenturyLink’s fiber optic plans from Stribbers David Phelps and Evan Ramstad. “That speed, also known as 1 gigabit per second, is available immediately in selected residential areas and for some small businesses, the company said. For ‘proprietary reasons,’ CenturyLink declined to identify those neighborhoods and business districts. … The upgrade requires service providers to change the type of wire that goes into a home. Instead of relying on the copper wire that phone companies deployed for most of the last century, the 1-gigabit level of service has to be delivered via fiber-optic line. In much of the Twin Cities, that means CenturyLink will have to replace wiring on poles or buried under yards.”

Oooohhhh … interesting. The Strib has endorsed Phyllis Kahn over Mahamud Noor. “Longtime incumbent Kahn wins the Editorial Board endorsement. In more than 40 years in the House, she has contributed mightily to state policy and has earned a 22nd term. … More recently, Kahn played a critical role in passing the Women’s Economic Security Act and has provided good leadership as chair of the Legacy committee.” I’m guessing outdoor columnist Dennis Anderson didn’t get a vote on that one.

Comments (12)

  1. Submitted by Rod Loper on 08/06/2014 - 08:16 am.

    Deducting debt?

    As an albeit non corporate person, I can’t do that. Go for it, Mr President and listen to the Chamber of Commerce howl.

  2. Submitted by Rod Loper on 08/06/2014 - 08:37 am.

    Deducting debt

    Excuse that post. Of course I deduct mortgage interest. I just don’t offshore my earnings. I shouldn’t post before I have my coffee.

  3. Submitted by Harris Goldstein on 08/06/2014 - 11:49 am.

    Medtronic

    Are we talking about the same Medtronic that receives billions in revenue annually from Medicare?

    No, can’t be the same. No one would have that much gall.

    (Billions is an assumption. $15b in 2013 revenue; 55% from US. It’s safe to assume that at least 25% of that US revenue is from Medicare. Feel free to correct me if I’m wrong.)

    • Submitted by Steve Titterud on 08/06/2014 - 12:17 pm.

      Regardless of the precise figures, it’s a great scam…

      …when you can export profits overseas and import debt from overseas – all the while claiming you’re an American company !!

      Some of our elected Representatives are falling all over themselves with admiration, they are on the job for Medtronic !!

  4. Submitted by Alex Seymour on 08/06/2014 - 12:34 pm.

    And let’s go metric as well

    The issue is not about off shore earnings. I would think we would want to encourage American corporations to export and grow internationally. Or maybe you are refereeing to transfer pricing – which this has noting to do with.

    It deals with the fact that America is almost the only country that uses domicile, not residence, to determine taxes. That is, American subsidiaries overseas are taxed twice (local and US) while oversea subsidiaries in America are only taxed once (USD). The US has mitigated some of this damage via loopholes, fudges, etc.

    Treating debt would just be another fudge to make the system more complex and irrational than it current is. The US should going the rest of the world and use residence to determine the tax jurisdiction. And just for good measure, we should go metric as well.

    • Submitted by Harris Goldstein on 08/06/2014 - 09:18 pm.

      Not So

      According to WSJ CFO Journal (http://blogs.wsj.com/cfo/2014/01/24/sec-asking-companies-more-on-overseas-taxes):

      “U.S. companies have some $1.7 trillion in cash owned by their foreign subsidiaries overseas on their books, but they are generally allowed to avoid paying taxes on those funds when they declare that those funds are permanently going to be invested to fund operations abroad.

      U.S. multinationals are not taxed twice on their overseas earnings, but if they pay lower taxes overseas, say 20%, when they want to bring them back to the U.S. they would have to pay the difference between the lower rate and the 35% U.S. statutory rate.”

      And I don’t think transfer pricing “has nothing to do with this”. American companies are adept at finding ways to allocate large profits to tiny offshore tax havens. For example, in Bloomberg:

      “U.S. multinational companies reported earning 43 percent of their 2008 overseas profits in Bermuda, Ireland, Luxembourg, the Netherlands and Switzerland, more than five times the share of workers and investment they have in those jurisdictions, according to a 2013 Congressional Research Service report.”

      And it’s only gotten worse since then.

      But you’re right about going metric.

  5. Submitted by Greg Kapphahn on 08/06/2014 - 12:47 pm.

    If and When the Time Comes

    That I need any of the products that Medtronic produces,…

    I will do everything in my power to ensure that I benefit from the products of their competitors, instead.

    I believe their is a very serviceable substitute for each and every product Medtronic produces,…

    and most of THOSE are produced by Medtech companies with a substantial presence in the Minnesota, as well.

    I can’t help but wonder whether its possible to discover which hospitals and doctors use those OTHER products (or can be persuaded to do so)?

    Such a list would be helpful for those of us wishing to properly reward Medtronic, it’s management, and its investors for its lack of loyalty to the state and nation without whom it would never have been born in the first place.

    • Submitted by Steve Titterud on 08/06/2014 - 01:23 pm.

      Your doctor will tell you at the time of his recommendation,…

      …although he may think you rather cheeky to ask, as it boils down to the uncomfortable subject of business practices rather than merely the patient’s best interest, in which the profession generally thinks of you as incompetent.

      These device companies are extremely crafty at all the ways they can curry a special place in the heart of the medical professional !! I am pretty sure Medtronic practices them all. So it could possibly be that if you request a competitive vendor’s product, it might turn out to be a heavy lift for your doctor. I hope, though, you never find yourself needing this kind of product !!

      • Submitted by Harris Goldstein on 08/06/2014 - 01:55 pm.

        And I’m sure it will be an unbiased opinion

        See Medtronic kickbacks: http://www.startribune.com/business/260978651.html

        • Submitted by Steve Titterud on 08/06/2014 - 02:19 pm.

          When a Medtronic salesperson reviews medical records to find…

          …cases where he might suggest implants, is this some HIPAA exception I’ve never heard of ?? Who gave permission ?? Were the patients ever informed ??

          [quote] The suit talks of a plan that “instructed sales representatives to personally review patient charts in friendly doctor’s offices” and to flag those patients the sales representative “felt should receive an implant.” [end quote]

          I had no idea how far they’d go. I wonder if this is the bottom ?

          Of course Medtronic points out that it admitted nothing in the deal.

          The whistleblower got $1.73 million for his efforts. I’m betting there are other potential whistleblowers in the Medtronic organization who’ve got some real stories to tell !! Come out of the woodwork !! You know who you are !!

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