“One of the biggest and most public corporate inversions last summer was the deal cut by Burger King to slash its tax bill by purchasing the Canadian company Tim Hortons and then ‘inverting’ the American company to Canadian ownership. And Weiss was right there, working on Burger King’s tax deal. Weiss’ work wasn’t unusual for Lazard.”

–Sen. Elizabeth Warren (D-Mass.), Huffington Post column, Nov. 19, 2014  

Warren is referring to Antonio F. Weiss, President Obama’s nominee for undersecretary of domestic finance at the Treasury Department. The nomination has drawn both criticism and support, and it seems there is a yet another lawmaker each day coming out for or against the investment banker.

Warren is leading the charge against the confirmation. She is gaining support from progressive lawmakers who believe that Wall Street is over-represented in top government posts, and that confirming Weiss would send the wrong message that “whatever goes wrong in this economy, the Wall Street banks will be protected first.”

A central argument against Weiss is that he comes from an industry that participates in corporate inversions for tax purposes — the very practice the White House, the Treasury Department and the Internal Revenue Service want to end.

To a large extent, this is a matter of opinion, so we will not issue Pinocchios on her statement. Indeed, no one is alleging that Burger King deal is illegal, and so it’s important to recall Judge Learned Hand’s famous quote in 1934: “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

But there is a lot of talk about inversion as the debate over Weiss’ nomination heats up. As a reader service, we will explain what inversions are, and why they have come into play in this context. Warning: It’s a complex subject.

The Facts

Weiss, 48, is the global head of investment banking at Lazard Ltd., a merger advisory firm. He worked for eight years at the firm’s Paris office prior to being named to his current position in 2009. Weiss advises corporations on their strategies for mergers and acquisitions.

The undersecretary of domestic finance is the Treasury’s third-highest position, and advises and oversees federal debt management, financial market oversight and regulation, consumer financial protection, the Financial Stability Oversight Council, and more. If confirmed, Weiss also would oversee the development of domestic and international Treasury policies related to the Dodd-Frank Act, aimed at protecting consumers and the financial system from future financial crises.

Critics say Weiss does not have the right background for the position. He built his career on international transactions, for one. They say appointing a Wall Street executive to the position would undermine efforts to regulate the financial industry. After all, his firm has been involved in corporate tax inversion deals that the Treasury Department, IRS and Obama want to stop.

Treasury Secretary Jack Lew recommended Weiss, who was then approved by Obama. In a letter to the Senate Committee on Finance, four previous undersecretaries of domestic finance (both Democrat and Republican) expressed their support for Weiss, saying he has “more than the requisite skills and experience to be successful in the office.”

Supporters, including the White House, believe Weiss has the extensive knowledge in financial markets that is required for the job and allow him to interact with domestic and international investors. They point to a Center for American Progress report co-authored by Weiss, “Reforming Our Tax System and Reducing Our Deficit,”  to show his views on tax policies align with the administration’s. But as opponents have pointed out, Weiss was one of 11 authors on the report, and there have been no other public indications of Weiss’ political or policy leanings.


Inversions are becoming increasingly popular, and they are legal. The Treasury Department defines inversion transactions as ones where a U.S. corporation “restructures so that the U.S. parent is replaced by a foreign parent, in order to avoid U.S. taxes.”

There are tax consequences of inversions, depending on the percentage of foreign ownership that results after the merger. A company with less than 20 percent foreign ownership remains an American-owned company for tax purposes. If 20 to 40 percent of a company’s ownership is foreign, it is considered an inversion for tax purposes. More than 40 percent foreign ownership is considered a foreign takeover, not an inversion.

If the company has at least 25 percent of its employees, sales and assets in the foreign country, it passes the “substantial business activities” test and is not considered an inversion.

While cross-border mergers for tax purposes are legal, the Obama administration has taken steps to reduce incentives for U.S. companies to invert. The Treasury Department and the IRS have asked Congress to pass anti-inversion legislation. But when it became clear Congress was not going to pass such legislation anytime soon, the Treasury Department announced plans to take away economic benefits for companies that invert for tax purposes.

“There is nothing wrong with genuine cross-border mergers,” Lew said in a September 2014 speech leading up to his announcement. “But these transactions should be driven by genuine business strategies and economic efficiencies.”

It is correct that Lazard has advised on inversion deals. The firm has been an adviser on some of the largest corporate inversion deals in the past year. But such deals are a small portion of the company’s total number of deals — 5 percent of Lazard’s “announced volume” for the year ending in the third quarter of 2014, according to chief executive Kenneth Jacobs. “We’re pretty comfortable that the driver of those transactions are strategic and have not significantly involved the tax consequences of the transactions,” he added.

Burger King deal

In August 2014, Burger King announced its $11 billion cross-border merger with the Canadian company Tim Hortons, known for its coffee and breakfast food. Weiss was one of the key advisers for the deal, which allowed Burger King to relocate its headquarters to Canada, where corporate tax rates are significantly lower. This deal became highly publicized and was criticized by many as yet another attempt by an American company to reincorporate overseas for tax benefits.

In 2013, Burger King’s total revenue was $1.1 billion. How much would Burger King potentially save on corporate taxes? No one really knows, which is why the estimates vary widely, from under $10 million a year to significantly higher than that. (One estimate also adds in shareholder savings from capital-gains taxes to end up with a truly impressive figure, but concedes the potential range of outcomes in capital gains savings could be as little as $10 million.)

It’s debatable whether the Burger King-Tim Hortons deal is representative of the types of inversions that the Treasury Department and the Internal Revenue Service want to stop.

As our colleagues at the Wonkblog explained when the deal was announced, there were business benefits other than lower tax rates that Burger King stood to gain as a result of buying Tim Hortons. For example, Burger King had been looking for opportunities to grow its breakfast sales. Tim Hortons also had been looking to expand internationally. Burger King did not respond to The Fact Checker’s requests for comment, but the company has said that any tax savings is not the key reason for the deal.

What does this have to do with Weiss? The Burger King deal is the only Lazard-advised inversion that has been publicly linked to Weiss. He is reported to have set the deal in motion. There is no public record that he was involved in any other inversion deals advised by Lazard.

Weiss’ supporters have said he was not involved in the tax portion of the deal, and an examination of an insider report filed with the Securities and Exchange Commission confirms this point: “Lazard did not express any view or opinion as to such tax elements or tax attributes. Lazard did not express any opinion as to any tax or other consequences that might result from the transactions, nor did Lazard’s opinion address any legal, tax, regulatory or accounting matters, as to which Lazard understood that Burger King Worldwide had obtained such advice as it deemed necessary from qualified professionals.”

The firm and Weiss declined comment.

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