Durbin, Reed, And DeLauro Introduce American Business For American Companies Act
WASHINGTON – U.S. Senators Dick Durbin (D-IL) and Jack Reed (D-RI) and U.S. Representative Rosa DeLauro (D-CT-03) today introduced the American Business for American Companies Act, which would extend the year-to-year government-wide ban on federal contracts for inverted corporations by moving it out of the annual appropriations process and into permanent law. It also eliminates loopholes in the current law that have allowed inverted corporations to bid for, and win, federal contracts, despite the ban currently in place.
Corporate inversions allow U.S. companies to shift their corporate citizenship from the United States to a low-tax foreign jurisdiction, even 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 1/5 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.
“When corporations choose to invert and don’t pay their fair share of taxes, they leave the rest of us high-and-dry. It’s known as corporate inversion but some call it corporate desertion,” said Durbin. “To add insult to injury, these companies are able to run away from their responsibilities and still be rewarded with government contracts. Where’s the fairness in that? Congress must close this loophole once and for all.”
“Closing the inversion loophole will protect American taxpayers and businesses that pay their fair share. Our bill would help put a stop to the corporate shell game that allows some companies to shift their address abroad for tax purposes while remaining in the U.S. and increasing the tax burden on middle-class families and Main Street businesses,” said Reed. “Large multinational corporations are exploiting the current system and this is a pragmatic, sensible solution to put a stop to inversions and corporate tax dodging.”
“We cannot continue to allow corporations to pretend that they are American companies, reaping the benefits this country has to offer, all while claiming to be another nationality when the tax bill comes,” said DeLauro. “Those corporations are cheating the American people out of revenue that could make a real difference in the lives of children and families, so that they can dodge taxes and gouge prices.”
Along with Sens. Durbin and Reed, this bill is cosponsored by Senators Tammy Duckworth (D-IL), Al Franken (D-MN), and Sheldon Whitehouse (D-RI). The House bill introduced by Rep. DeLauro is cosponsored by U.S. Representatives Lloyd Doggett (D-TX) and Sander Levin (D-MI).
In 2007, after a GAO report found that four of the top 100 federal contractors were inverted corporations, Congress included a government-wide ban on federal contracts with inverted corporations in annual appropriations bills. That restriction has been extended every year and remains in effect today. But just like with the tax code, corporations have found loopholes in the contracting restriction. In 2014, one estimate found that inverted corporations received nearly $1 billion in federal contracts over a five year period, and experts project the inversion trend to only become worse, not better.
The American Business for American Companies Act would extend the year-to-year ban by moving it out of the annual appropriations process and into permanent law. The legislation maintains the exception in existing law allowing an agency head to waive these requirements if doing so is in the interest of national security. It also eliminates loopholes in the current law that have allowed inverted corporations to bid for, and win, federal contracts, despite the ban currently in place. The legislation would close a loophole used by dozens of companies in recent years to move their tax address overseas and avoid paying U.S. taxes by purchasing a smaller foreign company while still qualifying for taxpayer-funded government contracts. The legislation also provides authority for the agencies to prevent subcontracts with inverted corporations and joint ventures that use subcontracts and joint ventures to evade the ban.
The bill also covers task and delivery orders. Under the current ban, some inverted corporations remain eligible for billions in new federal spending for years after inverting because of indefinite delivery contracts that allow them to continue to bid for, and win, projects in successive rounds. These contracts are typically structured with a government option to renew, and this bill would ensure that the new business goes to companies that don’t use the tax inversion gimmick, rather than rewarding companies that move overseas.
Previous Article Next Article