By Kevin Drawbaugh and Patrick Temple-West
WASHINGTON (Reuters) - Taking aim against corporate tax avoidance, 14 Senate Democrats called on Tuesday for curbs on U.S. multinationals that shift their tax domiciles abroad in deals known as "inversions."
While still rare, the deals are becoming more common, with two recently attempted transactions by Pfizer Inc and Omnicom Group Inc drawing attention to the strategy.
Under legislation introduced by Senator Carl Levin and other Senate Democrats, a two-year moratorium would be imposed on inversions, with minimum foreign ownership levels also raised.
"Our legislation would clamp down on this loophole to prevent corporations from shifting their tax burden onto their competitors and average Americans," Levin said in a statement.
The bill, to be introduced also in the House of Representatives, was unlikely to become law any time soon, because Congress is deadlocked on fiscal issues, policy analysts said.
But it signaled renewed urgency about fixing the U.S. tax code, last overhauled in 1986 and riddled with loopholes.
"Our current tax code unnecessarily encourages companies to shift their tax address offshore, eroding the U.S. tax base and endangering American jobs," said Senate Democrat Ben Cardin.
No Republicans co-sponsored the Levin bill, but leading Republican tax law writers have said they want to combat inversions as part of a comprehensive tax code reform.
TWO MAJOR DEALS
Both big inversions attempted recently have stumbled. One was a merger of U.S. advertising firm Omnicom with French rival Publicis Groupe SA. That deal collapsed.
The other was drugmaker Pfizer's pursuit of UK competitor AstraZeneca Plc. That deal was thrown into doubt on Monday when AstraZeneca rejected Pfizer's latest offer.
Several smaller inversions have succeeded. A Reuters review showed about 50 such deals have been done in the past 25 years, with half occurring since the 2008-2009 credit crisis abated.
U.S. drugstore chain Walgreen Co has been under pressure from some investors to do an inversion with Alliance Boots Holdings Ltd, the Financial Times has reported.
Inversions typically involve the buyout by a U.S. company of a foreign company and a restructuring to "reflag" the U.S. firm for tax purposes to the foreign company's home or elsewhere.
There are some restrictions on inversions, which erode the U.S. corporate tax base. President Barack Obama earlier this year proposed tightening the restrictions in his 2015 budget.
Obama wants to raise the minimum level of foreign ownership in a newly inverted holding company to 50 percent from about 20 percent, making the deals more difficult to carry out.
The Levin bill resembles Obama's proposal, but adds the two-year moratorium. Like the Obama proposal, the Levin bill also would block inversions if an inverted company's management and significant business operations remained in the United States.
(Editing by Howard Goller and Cynthia Osterman)