US Senate Tacks Anti-Offshore Amendment On To Defense Bill

by Mike Godfrey, Tax-News.com, New York

02 August 2002

The Senate voted by 95 to 3 to approve a bill authorizing $355.4 billion in military spending for the fiscal year 2003, including an amendment which will bar publicly traded companies that have relocated to tax havens since the end of 2001 from receiving military contracts.

The House version of the bill doesn't include the same amendment, and the two bills will be reconciled when Congress returns from its August recess.

In fact it is unlikely that any major defense contractor will fall foul of the amendment, even if it survives reconciliation and is signed by the President; so it is there mostly to demonstrate the concern of legislators to respond to current pressure against 'unpatriotic' companies that relocate to minimise their tax bills.

Companies that do so claim they are forced into it in order to compete against non-US firms that have more favourable tax legislation, so that if the amendment has any real effect it will be to worsen the international position of US defense contractors.

Last week, the House approved a similar provision to bar expatriating companies from getting contracts with the planned Homeland Security Department. Sen. Paul Wellstone (D., Minn.) said he would seek similar curbs in the Senate's homeland-security bill.

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