Introduced on Monday this New Jersey Bill would ban the award of state contracts to American companies that reincorporate abroad to avoid U.S. tax obligations (Assemblyman Troy Singleton, D-Burlington, sponsor of A3624).
Separate measures in the state Assembly and state Senate would leave inverted domestic corporations ineligible to receive state contracts or subcontracts for goods, services or construction projects. The bills, which also include S2361, define an “inverted domestic corporation” as “a corporation incorporated or previously incorporated in the United States that becomes or has become incorporated in a foreign country or that becomes or has become a subsidiary of a corporation incorporated in a foreign country, primarily for the purpose of avoiding United States taxes.”(Shirley Turner, D-Mercer, Sponsor S2361)
Both measures task the state Treasurer with determining whether a bidder meets that definition, which would include considering whether a corporate restructuring has slashed the company’s federal tax liability, whether the bulk of the company’s operations and assets are in the United States and whether U.S. shareholders own at least half of the company.
The sponsor of the Senate bill, Shirley Turner, D-Mercer, is among lawmakers who are advocating for related restrictions that Singleton suggested could form a comprehensive response on the part of the state to corporate inversions.
Turner is also sponsoring legislation, S2397 that would bar inverted companies from receiving state economic development grants and other financial aid. That includes the reimbursement of taxpayer-subsidized programs such as Medicaid, the lawmaker said Tuesday. Another Turner-sponsored bill, S2398, would bar the state from making pension fund investments in companies that have shifted their tax homes outside of the United States. Assembly members Bonnie Watson Coleman and Reed Gusciora, both Democrats who represent parts of Mercer County, are sponsoring identical measures in their house, as well as another bill blocking inverted companies from receiving state contracts, according to the Legislature’s website.
In recent weeks, several federal lawmakers have offered reform proposals — chief among them Sens. Dick Durbin, D-Ill., and Charles Schumer, D-N.Y., who want to limit so-called earnings stripping, where a U.S. subsidiary can take tax deductions on debt owed to a foreign master company, and Sen. Carl Levin, D-Mich., who wants a two-year moratorium on inversion deals.
On Sept. 8, U.S. Secretary of the Treasury Jacob Lew implored lawmakers to enact a retroactive ban on inversions and said his department will soon decide how to block the transactions.
Martin Milita is senior director with Duane Morris Government Strategies, a public policy consulting firm affiliated with the international law firm Duane Morris LLP. In addition to legislative, executive branch and grassroots lobbying, Martin Milita has successfully advised individuals and corporations on billions of dollars in public procurement’s.