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No federal contracts for tax haven firms

By Kay Bell ·
Thursday, June 12, 2014
Posted: 3 pm ET

What do corporate tax havens and the agency that oversees U.S. transportation activities have in common? The Transportation, Housing and Urban Development, and Related Agencies Appropriations Act of 2015, also known as H.R. 4745, or if you're into Washington, D.C. acronyms, THUD.

As Capitol Hill lawmakers are wont to do, amendments unrelated to the actual legislation under consideration were added to that federal funding measure this week. One of the amendments seeks to bar federal contracts to former U.S. businesses that now are incorporated or chartered in Bermuda or the Cayman Islands.

You might remember that those island nations are prime corporate tax haven spots.

© Raul Rosa/

Fortune 500 profits earned in Bermuda, above, and the Cayman Islands far exceed these countries' GDP.

Corporate American 'pretenders'

The effort to make it harder for certain tax haven companies to do business with Uncle Sam was sponsored by two House Democrats, Rep. Rosa DeLauro of Connecticut and Rep. Lloyd Doggett of Texas.

"Some companies send their tax dollars to support our infrastructure and military, while others just send a post card that says, 'You can find me in Bermuda or the Caymans. Glad you are not here,'" said Doggett in a statement announcing the full House approval of the amendment.

Co-sponsor DeLauro also decried the U.S. services that these off-shore companies get while avoiding paying for them with their taxes.

"The profits Fortune 500 companies claim were earned in Bermuda and the Cayman Islands in 2010 totaled over 1,600 percent of these countries' entire yearly economic output," DeLauro said in the joint statement with Doggett. "It defies logic to believe these companies conducted such a large amount of business there. They take advantage of our education system, our research and development incentives, our skilled workforce, and our infrastructure, all supported by U.S. taxpayers, to build their businesses, and then turn around and abuse tax havens. These companies should not be allowed to pretend they are an American company when it is time to get federal contracts, then claim to be an offshore company when the tax bill comes."

Next step, the Senate

The restriction on federal contracts would apply only to the 2015 fiscal year, which runs from this Oct. 1 to Sept. 30, 2015.

It also must make it through the Senate. That chamber's Transportation, et. al., funding measure, S. 2438, is awaiting consideration by the full Senate. If any differences with the House bill aren't worked out then, the two bills must go through a conference committee.

The good news is that Congress appears to be committed to finishing funding bills before the 2015 fiscal year begins.

However, it's less clear as to whether companies that are taking advantage of legal tax haven opportunities will suffer at least a little in the legislative process.

Do you think DeLauro and Doggett are right in wanting to keep federal contracts out of tax-haven companies' hands? Do you think it will make a difference, or is it just symbolic?

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Veteran contributing editor Kay Bell is the author of the book "The Truth About Paying Fewer Taxes" and co-author of the e-book "Future Millionaires' Guidebook."

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