Offshore firms are targeted (CA)

[Todd33]

http://www.sacbee.com/content/business/story/10417848p-11337479c.html

State Treasurer Phil Angelides and Democratic lawmakers are ready for a stiff fight in the Assembly this week in their renewed campaign to collect millions in taxes from expatriate companies.

In a final push Tuesday, Angelides called on Gov. Arnold Schwarzenegger to press Republicans to support legislation aimed at closing loopholes for U.S. corporations that establish their legal headquarters offshore to skirt California taxes.

At issue are nearly two dozen publicly traded U.S.-based companies. Critics describe their offices in Bermuda or the Cayman Islands as "paper headquarters," since their operations remain in the United States.

The State Franchise Tax Board estimates that the tax breaks cost California $10 million a year - as much as $132 million over the next decade.

"It is giving an unfair advantage against California businesses," Angelides said during a press conference. "They're selling their products in the California market. They just don't want to pay our corporate income taxes."

Assemblywoman Judy Chu, D-Monterey Park, who is carrying the measure, AB 2584, fears more companies will reincorporate offshore and drain state tax revenues further, up to $180 million over a 10-year period. The bill "will put an end to one of the biggest tax travesties in our state."

The measure, however, faces an uphill battle when it comes up for a vote as early as today in the Assembly. The California Chamber of Commerce opposes the bill, and some Republicans consider the legislation a tax increase for corporations. More important, the governor has given no signals about his position on the bill.

"This bill will have unintended consequences by making California less attractive to business development and will also have trade implications. It could hurt our economy," said Sara Lee, a chamber spokeswoman.

In January, a similar bill failed in the state Senate, falling one vote short of the two-thirds needed for passage. In the Assembly, the bill must garner support from at least a half-dozen Republicans in order to pass.

On Tuesday, Angelides and Chu urged Schwarzenegger to back the measure, arguing that it is a matter of financial fairness to California enterprises and would be a boost to the state budget and economy.

Angelides is banking on some California Republicans to break ranks. He hopes they will be swayed by GOP members in the U.S. Senate, including Sen. Charles Grassley of Iowa, who have fought to curb these types of corporate tax shelters.

Public pension funds, including the giant California Public Employees' Retirement System, have criticized the companies for escaping U.S. tax obligations and pressured executives to return to the states. So far, their efforts have been unsuccessful.

These offshore companies, such as industrial manufacturer Ingersoll-Rand Co. of Woodcliff Lake, N.J., and disk-drive maker Seagate Technology of Scotts Valley in Santa Cruz County , have defended the re-incorporation. They say foreign companies have enjoyed tax advantages in the United States that U.S.-based firms don't receive. They say they do pay the state taxes required by law.

"(Incorporating offshore)was done as a matter of trying to level the playing field with international competition," said Paul Dickard, a spokesman for Ingersoll-Rand.

Check out the bold. Only the Republicans would think of paying the normal taxes is a tax increase, I'd laugh if it didn't make me want to cry.

The same thing was addressed in the Congress. I think it was Welstone who had a bill to make it so companies with offshore mailboxes that don't pay federal and state taxes (pay in full) don't get federal contracts. The Repubes of course killed it.

Let me get this straight; 1. Tax cuts for the rich 2. It's legit to put a mailbox in the Caimens to avoid paying taxes 3. The rich have accountants and don't pay in full (according to Bush) 4. They killed a version of the $87B that would make the rebuilding of Iraq loans and the war cost was paid with a repeal of the top 1% tax cut--- but the rest of us are stuck paying in full with out of control spending? I guess it's fair if your party is for the rich and the companies, but what about the rest of the 90% of us? Spin spin right wingers, spin!