Will NJ become the first state to ban corporate tax inversions?
Some lawmakers in the New Jersey state legislature recently announced plans to remove incentives and cut contracts with U.S. companies that move offshore for tax purposes. According to a NorthJersey.com report, the proposed law changes are the direct result of Pfizer Inc.’s merger with Allergan PLC in Ireland in an attempt to lower its corporate tax rate.
The objective of the proposed legislation
The federal government recently announced changes to offshore disclosure and tax inversion laws to limit the corporate tax incentives. However, the NorthJersey.com report showed that New Jersey would be the first state in the country to remove these contracts and incentives for U.S. companies headquartered in their states. According to a NorthJersey.com interview with Sen. Shirley Turner, a Lawrenceville Democrat, this legislation would be an opposition to Gov. Chris Christie’s push to the federal government to lower corporate taxes.
“I want to send a strong message to Pfizer as well as any other corporate deserters looking to do the same thing,” Turner explained. “They are parasites living off of our taxpayers, and it’s not like they’re going bankrupt by any means.”
The background of the merger
The Allergan PLC and Pfizer Inc. merger is significant because the $160 billion partnership would create the largest corporate tax inversion in the world. As both companies have operating headquarters in New Jersey and Ireland, the merger makes sense from an operations standpoint, but it also represents a recent trend. Many U.S. companies have effectively completed tax inversions in Ireland in the last few years because of its 12.5 percent corporate tax rate. Currently, the corporate tax rate in the U.S. is 35 percent. While many U.S. companies pay far less than the nominal rate, it still makes Ireland a desirable destination for larger domestic companies.
Criticism
One of the most significant arguments against this newly proposed legislation at the state level is that the federal government has not made corporate tax inversions less profitable. Therefore, if the federal government fails to address the problems that contribute to higher numbers of offshore tax evasion for larger companies, states like New Jersey do not have the resources to keep those tax dollars. In a statement cited by NorthJersey.com, Joan Campion, a Pfizer spokesperson, agreed with Christie’s criticism of the proposed legislation because it only stimulates more corporate tax inversions.
“This legislation discourages investment in New Jersey,” Campion argued. “A reformed tax code that includes a territorial system would stimulate investment in the United States and allow American businesses to compete on a level playing field.”
When a Child Turns 18: The Gap in Your Family’s Estate Plan
Once a child turns 18, parents lose the automatic legal authority to make medical and financial decisions on their behalf, even if the child still lives at home or remains on the family’s insurance. Three documents close that gap: a durable power of attorney, a health care proxy or directive, and a HIPAA authorization. For […]
Business Mediation: An Overview and Practical Tips
Business mediation is a confidential, voluntary process in which a neutral third party helps companies negotiate a resolution to a commercial dispute without going to trial. Because working with a mediator is very different from litigating in the courtroom, it is important to understand how commercial mediation works, when it makes sense for your dispute, […]
Top 5 Causes Leading to Construction Defect Litigation
The five most common causes of construction defect litigation are design defects, substandard materials, workmanship defects, code violations, and subsurface defects. Because these flaws can compromise a building’s integrity, functionality, or safety, they frequently lead to disputes involving multiple parties and high financial stakes. Key takeaways: What is Construction Defect Litigation? Construction litigation is complex, […]
How to Protect Your New Jersey Business When Going through a Divorce
The most effective ways to protect your business in a divorce are put in place before one begins: a prenuptial or postnuptial agreement, clean separation of business and personal finances, and divorce contingencies built into your operating or buy-sell agreements. If divorce is already underway, the priorities shift to establishing how the business is classified […]
The most common franchise disputes involve breach of contract, franchise termination and non-renewal, intellectual property rights, territorial encroachment, royalty and fee payments, franchisor support obligations, and violations of state franchise laws such as the New Jersey Franchise Practices Act. Franchisors and franchisees can often resolve these conflicts by providing written notice detailing the dispute and […]
Reputational Risk and Legal Exposure: Why New Jersey Businesses Must Manage Them Together
New Jersey businesses must manage legal and reputational risk together because modern disputes play out on two fronts at once: the legal proceeding itself and the court of public opinion, where customers, employees, investors, and business partners often reach conclusions long before a judge or jury has had the opportunity to evaluate the facts. Success […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
