Measure is Designed to Prevent U.S. Companies from Fleeing Overseas with Taxpayer Dollars
Legislation sponsored by Assembly Democrats Bonnie Watson Coleman, Troy Singleton, Gary Schaer, Reed Gusciora and Joseph Lagana to help entice companies to stay in the United States and prevent them from fleeing overseas with taxpayer dollars was approved by an Assembly panel on Thursday.
“These so-called ‘inversions’ have become all the rage in recent years and companies are coming up with more and more creative ways to avoid paying U.S. taxes,” said Watson Coleman (D-Mercer/Hunterdon). “While efforts are being devised at the federal level to combat this corporate chicanery, we can at least take these steps here at home to protect New Jersey taxpayers’ dollars.”
“If a corporation doesn’t want to pay its fair share of taxes, it shouldn’t be benefitting by receiving taxpayer-funded dollars,” said Singleton (D-Burlington). “Hopefully, this will create more of an incentive for them to stay in this country and continue employing U.S. workers.”
The bill would prohibit any state-funded contracts or development subsidies from being awarded to an “inverted domestic corporation,” which is a company incorporated or previously incorporated in the United States that becomes incorporated in a foreign country or becomes a subsidiary of a corporation incorporated in a foreign country, primarily for the purpose of avoiding United States taxes. The stipulation would also apply to any contracts or development subsides funded by independent state authorities.
“Punitive measures won’t prevent a company from leaving the United States,” said Schaer (D-Bergen/Passaic). “Rewarding domestic corporations with the opportunity to compete for taxpayer funded contracts is a far better incentive to help keep them operating in this country.”
Under the bill, the state treasurer will be responsible for determining, on behalf of the state or any independent state authority, whether a corporation seeking a contract, subcontract or development subsidy is an inverted domestic corporation.
In making this determination, the state treasurer will consider whether the change in corporate organization has substantially reduced the corporation’s federal tax liability, whether the corporation has the majority of its business operations in the United States, whether a majority of the corporation’s assets are located in the United States, whether the corporation is at least half owned by United States shareholders, and such other factors as the State Treasurer shall deem appropriate.
“A carrot is far more enticing than a stick, so to speak,” said Gusciora (D-Mercer/Hunterdon). “Absent any major overhauls in our tax code, this is one of the best incentives to help keep companies in the United States.”
The bill stipulates that a corporation that has been barred from performing federal contracts because it has been determined to be an inverted domestic corporation under federal law will be an inverted domestic corporation for the purposes of the bill.
“Only those companies loyal to the U.S. and our workforce should be able to reap the benefits of taxpayer-funded contracts or subsidies,” said Lagana (D-Bergen). “This bill will help incentivize companies to stay here and employ our workers.”
The bill was approved 7-3 by the Assembly Commerce and Economic Development Committee, which amended two similar bills and merged them into one today (A-3624/A-3621).