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Federal Contracts and Corporate Accountability: Banning Corporate Tax Traitors from Federal Contracts and Other Taxpayer-funded Subsidies

Related Legislation:

An amendment was added to the FY 2003 Defense Appropriations which barred any use of the funds for companies that had incorporated in an offshore tax-haven after 2001.

In 2004 Rep. Sherrod Brown (D-OH) introduced the Accountability and Responsibility in Contracting Act (H.R. 4394), which would make ineligible for Federal contract awards any expatriated corporations and any companies that do business with, or own foreign subsidiaries that do business with, state sponsors of terrorism or foreign terrorist organizations.

In 2004, the House passed an amendment to the 2005 Foreign Operations Appropriations bill that would prohibit the Export-Import Bank from approving direct loans or loan guarantees to corporate expatriates -- former U.S. companies who set up paper headquarters in tax havens in order to avoid U.S. taxes. Four of the top 23 recipients of Export-Import Bank subsidies are corporate expatriates, including Ingersoll-Rand, Nabors, Noble Drilling and Weatherford.

States that have adopted legislation to bar companies from state contracts include California, Montana and North Carolina. (Similar laws have been introduced in MA, MN, PA, IL and TX).

A provision that bars corporate expatriates from Homeland Security Department contracts was introduced by Senator Levin and passed in the 2004 DHS appropriations bill. The provision only applies to companies which reincorporated “after 2002.” (The loophole was inserted into the appropriations bill during the closed-door House/Senate conference committee mark-up, ensuring that the ban would not affect a $10 billion DHS contract already given to Bermuda-based Accenture.) The House 2004 Homeland Security Department appropriations bill was passed by a 234-197 vote that largely broke down along partisan lines. The House version, which included the Accenture loophole, reversed a House Appropriations Committee 35 to 17 vote in favor of an amendment introduced by Rep. DeLauro (D-CA) that would block corporate tax traitors from receiving Homeland Security Department contracts.

Accenture hired powerful lobbyists to win this battle, including Bush family confidant Charlie Black, former House Appropriations Committee chair Bob Livingston (R-LA), and Reagan's chief of staff Ken Duberstein. The Bermuda-based consulting firm (once a part of Arthur Andersen) has received hundreds of millions of dollars worth of government contracts in the past two years, including a contract to upgrade the IRS' web site and, recently, a contract from the Department of Homeland Security worth up to an estimated $10 billion. To learn more about "tax traitor" lobbyists go here.

Related Information:

For a list of companies that have moved offshore go Here.

In July, 2003, Rep. Neal (D-MA) posted a list of corporate "runaways" with FY 2002 government contracts.

In 2004, the GAO reported that corporate tax dodgers have edge on federal contracts.

On October 1, 2002 the Government Accounting Office (the investigative arm of Congress) issued a new report (GAO-03-194R) which found that four of the top 100 federal contractors are incorporated in a tax haven country, including Accenture, Ltd. (Bermuda), Foster Wheeler, Ltd. (Bermuda), McDermott International, Inc. (Panama), and Tyco (Bermuda).

In February, 2004, the GAO issued a followup report, "Information on Federal Contractors with Offshore Subsidiaries" , which found that 59 of the 100 largest publicly traded federal contractors from FY 2001 report having a subsidiary in a tax haven country.

Pentagon contracts with tax scofflaws. In February 2004, GAO found that over 27,000 Department of Defense (DOD) contractors owed about $3 billion in unpaid taxes as of September 30, 2002, because the DOD had failed to implement IRS collection procedures. GAO also "found abusive or potentially criminal activity related to the federal tax system through our audit and investigation of 47 DOD contractors." For the full GAO report, go HERE.

Related Sites:

Citizens for Tax Justice
Citizen Works
Prof. Michael McIntyre's web site
Tax Justice Network(global network working on tax-related issues)
Tax Analysts' briefing book
Taxpayers for Common Sense
Center for Budget Priorities report on declining corporate tax revenues
"Dodging Their Fair Share" (related article)

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