WASHINGTON – U.S. Senate Democratic Whip Dick Durbin (D-IL) and U.S. Senator Jack Reed (D-RI), along with U.S. Representative Lloyd Doggett (D-TX-37), today introduced the Stop Corporate Inversions Act, abill to stop business practices known as inversions—corporate deals that allow U.S. companies to shift their corporate citizenship from the United States to a low-tax foreign jurisdiction, while keeping their executives and headquarters in the United States. This is accomplished by merging with a foreign company that can be as little as one-fifth of the size of the U.S. corporation and results in large and permanent tax breaks. Unlike other tax loopholes that can be closed on a year-to-year basis, a tax inversion is a permanent change in a corporation’s structure.
Get The Latest News!
Don't miss our top stories and need-to-know news everyday in your inbox.
The billwould close the tax loophole that allows U.S. companies to acquire smaller foreign companies and move their tax home to a foreign jurisdiction as part of the overall transaction to avoid paying U.S. taxes.
“Corporate inversions allow American companies to dodge their fair share of taxes. These companies reap the rewards of America but deliberately scheme their way out of paying taxes. It’s about time we close this loophole permanently to ensure American families and small businesses aren’t left behind,” Durbin said.
“Giant corporations should not be allowed to skirt the tax code and avoid paying their fair share. This bill would eliminate glaring corporate inversion loopholes and prioritize Main Street businesses over the wealthiest corporations,” said Reed.
“We must close the tax loopholes — including an ability to evade taxation by renouncing US citizenship — that let American multinationals escape paying their fair share of our country’s national security, highways and other public services,” said Doggett. “Trump’s Tax Scam 1.0 drove the effective tax rate on U.S. multinationals down to an average of just 7.8 percent, and his ‘Big Ugly Bill’ cut rates even further. If companies want the benefits of doing business in America, they should pay taxes in America — not game the system and run for the exit.”
Along with Durbin and Reed, U.S. Senators Chris Van Hollen (D-MD), Elizabeth Warren (D-MA), Sheldon Whitehouse (D-RI), Richard Blumenthal (D-CT), Tammy Duckworth (D-IL), Mazie Hirono (D-HI), Bernie Sanders (I-VT), and Tammy Baldwin (D-WI) are cosponsors of the Stop Corporate Inversions Act.
Stop Corporate Inversions Act of 2026
Congress enacted Section 7874 of the Internal Revenue Code in 2004 to discourage U.S. companies from acquiring smaller foreign companies and moving their tax home to a foreign jurisdiction as part of the overall transaction.
Since the provision was enacted in 2004, more than 35 U.S. corporations have inverted, many by acquiring a smaller foreign company to avoid Section 7874. The Stop Corporate Inversions Act of 2026 would close this loophole, leveling the playing field between large multinational corporations that seek to avoid taxes and responsible domestic businesses that pay their fair share:
- The bill would treat a combined foreign corporation as a domestic corporation under two circumstances – (1) if the shareholders of the former U.S. corporation own more than 50 percent of the new combined foreign corporation, or (2) if the affiliated group that includes the combined foreign corporation is managed and controlled in the United States and engages in significant domestic business activities in the United States.
- The bill would repeal the 60 and 80 percent ownership tests as well as the inversion gain applicable under such circumstances.
- The bill would maintain the foreign substantial business exception under Section 7874 by exempting the affiliated group if it has substantial business activities in the foreign country where the new combined corporation is incorporated.
This legislation is endorsed by: Oxfam America, Public Citizen, Americans for Tax Fairness, and The FACT Coalition.
