June 17, 2021
House passes corporate disclosure package requiring country-by-country tax reporting for multinationals, 215-214
Measure also requires new disclosures on climate risks, CEO pay, corporate political contributions
The House on June 15 narrowly passed, 215-214, a package of measures (HR 1187) intended to improve corporate governance by requiring a number of new disclosures by public companies. No Republicans supported the bill, while four Democrats voted against. Notably, the package included a measure based on HR 3007, sponsored by Cindy Axne (D-IA), which would direct the SEC to issue regulations requiring larger multinational corporations to publicly disclose country-by-country financial information for each of their subsidiaries, including profits, taxes paid, employees and tangible assets. HR 1187 also includes the following bills that had been approved individually by the House Financial Services Committee earlier this year:
The Democrats voting no were Henry Cuellar (TX), Lizzie Fletcher (TX), Susie Lee (NV) and Kurt Schrader (ME). Attached with this Alert please find PDFs with the legislative text of the combined bill, a section-by-section summary, and the White House's statement of policy (SAP) on the bill.
During floor debate, Rep. Axne said, "For decades, we've accepted that publicly traded corporations should regularly provide operating information about their business to the public in the interest of those looking to invest in their company and those whose hard-earned dollars can be included in those investments. But the current disclosure requirements do not adequately cover the realities of the modern world — and allow corporations to avoid U.S. taxes, offshore U.S. jobs, and underinvest in the workers that keep their companies strong … I look forward to working with my Senate colleagues and SEC Chair [Gary] Gensler to get these requirements updated."
In his floor remarks, Bill Huizenga (R-MI), a senior member of the Financial Services Committee, said, "My Democrat colleagues once again are seeking to hijack our securities laws to push left-wing political and social agendas … Make no mistake: this bill will increase costs on publicly owned companies, discourage companies from going public, and frankly could encourage not only private companies to stay private but even have and entice public companies to go back to being private companies."
White House in Support. In its statement of administration policy on HR 1187, the White House said, "As our Nation builds a more equitable economic future, these measures will help safeguard the financial security of America's families, businesses and workers from risks including the climate-related financial risks they already face … The Administration supports efforts to account for climate risk in financial services, empower and protect investors, and promote transparency, accountability and equity in corporate governance."
Senate Prospects. Given Republican opposition, HR 1187 would likely have to surpass a difficult 60-vote threshold in the Senate if considered under regular order. Democrats conceivably could include the country-by-country tax reporting and other disclosures in a 51-vote budget reconciliation bill, but their lack of substantial revenue or spending effects could subject the provisions to being challenged and stripped from such a bill under the "Byrd rule."
Additional information is available in the attached Tax Alert.
Corporate disclosure package Alert
HR 1187 text
HR 1187 section by section
HR 1187 SAP