Companies That Evade Federal Taxes Still Get Federal Contracts

To add insult to the injury being done by corporations that essentially renounce their U.S. corporate citizenship to avoid U.S. taxation, many of these same companies are winning federal contracts – often in violation of laws designed to limit these contracts to genuinely American companies.

That's the finding of a Bloomberg News investigation that features some of the companies we highlighted Monday based on a set of Fortune magazine stories.

The story notes that Ingersoll-Rand, which changed its corporate address to Bermuda to avoid American corporate taxes, still gets federal contracts worth hundreds of millions of dollars. The Ingersoll-Rand subsidiary Trane in a sales brochure boasts that it "counts among our valued customers nearly all major government departments and agencies."

Ingersoll-Rand is on Fortune's list of top American corporate tax avoiders. It is also, according to Bloomberg, "one of more than a dozen large U.S. companies that have shifted their tax addresses offshore yet still earn federal business, a Bloomberg News investigation has found. In all, these companies are collecting more than $1 billion a year from the government, even as their tax-avoidance techniques have deprived the Treasury of untold billions of dollars in revenue."

Bloomberg details efforts over the past decade to prevent companies like Ingersoll-Rand, most of whom use a tactic known as "inversion" to shift their address for tax purposes to a low-tax country, from getting federal contracts, and how those efforts have been rendered virtually toothless. In Ingersoll-Rand's case, the company essentially declared itself out of the reach of the contract restrictions and kept on bidding on and winning federal contracts.

According to a Congressional Research Service report released by Democrats on the House Ways and Means Committee this week, 47 U.S. corporations have reincorporated themselves through inversions in the last 10 years, far more than the number doing so in the previous 20 years.

“These corporate inversions are costing the U.S. billions of dollars and undermining vital domestic interests," said Rep. Sander Levin, ranking committee member, in a statement. "We can and should address this problem immediately through legislation to tighten rules to limit the ability of corporations to simply change their address and ship U.S. tax dollars overseas.”

That legislation should also take steps to ensure that companies that structure themselves to avoid U.S. taxes can't then turn around and profit from U.S. taxpayers through the contracting process.