A letter from U.S. Treasury Secretary Jack Lew is urging Congress to crack down on so-called "inversions" that let U.S. corporations shift their tax burdens out of the country. It could have a major impact on Fridley-based Medtronic.
Medtronic announced it was planning an acquisition of Ireland-based Covidien last month. In an explanation on Medtronic's website, the company says the deal will help it access new cash reserves without paying additional U.S. taxes.
That move has drawn criticism in the U.S., and Lew called similar deals an abuse of the tax system, in a letter to Congress this week. He called on lawmakers to make such deals more difficult and to make the law retroactive to May. That could scuttle the Medtronic deal with Covidien.
An excerpt from Lew's letter:
Recently announced transactions cover a wide range of industries incoluding pharmaceuticals, retail, consumer, and manufacturing. The frims involved in these transactions still expect to benefit from their business location in the United States, with our protection of intellectual property rights, our support of research and development, our investment climate, and our infrastructure, all funded by varuous levels of government. But these firms are attempting to avoid paying txes here, notwithstranding the benefits they gain from being located in the United States.
Medtronic says the deal will allow it to invest $10 billion in research, venture capital and acquisitions in the U.S. in the next decade.