‘Earnings stripping’ may be Next on the Obama Administration’s Hit List

One of the methods that companies use to save money so they can hire more people and spend more money on precious and lifesaving research and development that the Obama administration does not like and did not address last month in a bid to clamp down on corporate inversions (another method to escape irrationally high taxes) is ‘earnings stripping’.

This technique is widely practiced and covers a range of financial dealings of multinationals in which their US tax burden is reduced. It includes companies that have moved their tax domiciles overseas in inversion deals as well. According to tax attorneys, this could well be the Obama administration’s next target. They will fit this in their schedule when they are not bombing empty buildings in the Middle East and allowing Ebola infected people to fly right in the US and do whatever they want.

The new rules revealed by the US Treasury Department target specific strategies aimed at tax avoidance. These rules are designed to stop the rising trend of deals in which US companies buy smaller, foreign competitors, and adopt their tax nationality. The Treasury is open to public comments on ways to make inversions financially less appealing, which some analysts say is an invitation of ideas on how to deal with earnings stripping.

The Treasury’s rules have not touched on anti-earnings stripping. Questions of the legality of tackling the practice by the administration are still uncertain according to congressional aides and lobbyists, which is why the administration has moved with caution. Many people believe that they wish Obama moved with caution with Obamacare which has made millions of Americans part time employees, increased health care costs for hard working Americans, and added to America’s debt.

American businesses do not want to see any more regulations

Some analysts say that the request for comments on earnings stripping is not likely to be a framework of future regulations. Some businesses are wary about Congressional action. For inverted companies, the practice involves the lending of money by a foreign parent to their US unit, who in turn sends the US profits back via partially US tax-deductible interest.

Democratic senators Chuck Schumer and Dick Durbin, who share a big government and central planning philosophy which has bankrupted California, Italy, Greece, and so on, have proposed a clampdown on earnings stripping. They propose a reduction in the deductions that a company can claim from 50 percent to 25 percent of income for companies even for companies that have resorted to inversion years ago. This would potentially end a rule that allows companies with less leverage to avoid deduction limits.


Several tax attorneys and other analysts believe that lawmakers are not likely to pass any inversion legislation in the session before 2015. Other issues are likely to be high on the agenda such as trying to figure out how to allow more people to fly to and from ebola infected areas, how to push the job producing Keystone pipeline back even further, how to make sure the southern US border remains wide open for illegals to cross so they can soak up more American resources, and so on.

Overseas Americans stranded after foreign banks do not want to deal with US tax returns 

In other tax related news, over 1,500 Americans have given up their citizenship due to the reluctance of foreign banks to complete the expensive and complicated tax returns required by the controversial new tax law known as the Foreign Accounts Tax Compliance Act (FATCA). The tax law was passed in 2010 to clamp down on tax offenders and banks that assist in money laundering. Congress passed the legislation hoping that it would get back billions of dollars in unpaid taxes. It has not.

The Democratic socialists such as Pilosi, Boxer, and Reid just to not understand why hard working Americans want to keep what they made in their life.

Being an American is not so special anymore. After all, America is not even protecting itself from radical Islam, Latino illegal gangsters such as MS-13, the Mexican Mafia, high national debt, and home grown terrorists who cut off American heads. Apparently earnings stripping is highly important to the Democrats.