The bank would pay between $16 billion and $17 billion for alleged mortgage-related abuses, according to a source familiar with the talks. A final announcement could come next week.
At a news conference Wednesday, the president said he would act when he can without Congress but said there are limits to his authority. He also spoke about a range of foreign policy issues.
By October, the state will have the most ambitious commercial food waste ban in the U.S. Institutions that produce more than a ton of waste a week will have to find new uses for their scraps.
Electric car manufacturer Tesla has started work on a huge new battery factory in Reno, Nevada, but don’t let that fool you. Reno may not end up with the factory and the 6,500 jobs it is expected to create.
Tesla started building in Reno, even though its new “Gigafactory” may not actually be completed there.
On a recent earnings call, CEO Elon Musk said he might start similar construction on one or two other sites. The company is also looking at locations in Arizona, California, New Mexico and Texas.
“Before we actually go to the next stage of pouring a lot of concrete though, we want to make sure we have things sorted out at the sort of state level, that the incentives are there that makes sense,” Musk said, adding “on the Nevada side, at this point the ball is on the court of the governor and the state legislature.”
Tesla wants the eventual host state to chip in 10 percent of the factory’s $4-to-$5 billion price tag. While it negotiates, the car maker says it’s worth construction costs to get the factory up and running as soon as possible.
"Any potentially duplicative investments are minor compared to the revenue that could be lost if the launch of Model 3 were affected by any delays at our primary Gigafactory site," the company wrote in its recent investor letter.
“It’s pretty unusual for them to be actually starting construction on a site,” says Tim Bartik, an economist for the W.E. Upjohn Institute for Employment Research, though he says shopping around for a good deal from states is common.
Still, states should approach these types of deals with caution.
“People should realize that incentives are not a free lunch,” says Bartik. “They do involve costly resources.”
Local officials need to analyze what kind of wages the company will pay or the types of suppliers it might work with.
“Until recently, most states weren’t doing this kind of analysis,” says Josh Goodman, with the Pew Charitable Trusts Economic Development Tax Incentives Project. “Sometimes, they might do the analysis on a program that was getting attention because there was a lot of problems there.”
But many of states are wising up, Goodman says, passing laws and requiring periodic reviews of their incentives to be sure they are actually good deals for the state.
Graphic by Shea Huffman/Marketplace
Pharmacy company Walgreens announced it is not going to invert after all.
Corporate inversion is the practice of one company merging with another that's based abroad to avoid taxes or gain access to assets held abroad. At least 47 U.S. corporations have reincorporated overseas in the past decade, more than during the past 20 years combined, according to the Congressional Research Service.
Walgreens first began to buy up British firm Alliance Boots two years ago, purchasing a 45 percent stake in the company and laying out plans to purchase the remaining 55 percent in 2015. At some point, Walgreens considered the possibility of converting the deal to buy Alliance Boots into a deal to invert via Alliance Boots.
“We had to look at whether the structure of the deal would allow for an inversion,” says spokesman Michael Polzin, and that structure proved unworkable. “We’d have to rip up that deal and come up with a new deal.”
There’s a special provision in U.S. tax law that says the inversion doesn’t count – that is, the newly formed company won’t be considered a foreign company, and won’t get tax benefits – if the shareholders from the U.S. side of the inversion own 80 percent or more of the newly formed company’s shares going forward.
“Walgreens would’ve had to renegotiate the deal with Boots in order to make sure that Boots’s shareholders ended up with at least 20 percent of the combined merged entity’s stock and that would’ve been difficult to accomplish,” says Dick Harvey, distinguished professor of practice at Villanova School of Law and Graduate Tax Program.
Walgreens is also different from many other companies in that people know it well, and its brand has accumulated significant consumer good will.
“This is a 100-year-old pharmacy in the United States, with a very long and storied legacy and it’s something the consumer is familiar with,” says Ross Muken, senior managing director and partner at ISI Group. “If [pharmaceutical and medical device companies] AbbVie or Covidien leave the United States, no one knows those brands as a consumer. But most people will know Walgreens.”
Consumers could be turned off if the Walgreens they knew skipped town for tax reasons. If consumers didn’t make the connection, an aggressive ad campaign by a competitor could easily help convince them.
There are about eight corporate inversions pending, Harvey says, but he estimates there could be 50 to 100 more in the next year or two. Politicians and government officials are already taking aim at corporate inverters.
“My attitude is, I don’t care if it’s legal, it’s wrong,” President Barack Obama told an audience at Los Angeles Trade-Technical College in a speech July 24. “I propose closing this unpatriotic tax loophole for good."
Uncle Sam is a customer Walgreens would rather not antagonize — it gets between a quarter and a third of its business from the government through Medicare and Medicaid, says Muken. But most companies considering an inversion don’t have these concerns.
While many businesses wait for comprehensive tax reform, which may or may not materialize, the treasury department announced it would try to close some inversion loop holes on its own. Harvey says this is unlikely to deter many firms.
“There are two or three main benefits from an inversion – and treasury might be able to address one or two of them but there will be other benefits, that could result in businesses inverting even if treasury takes action," Harvey says.
Those benefits include gaining access to assets held abroad, and stripping out earnings from the United States.
For most firms considering an inversion, he says, those temptations are too good to resist.