August 5, 2014 by Arezu Sarvestani
Democrats in the Senate and House push a measure to withhold federal contracts from companies that move their headquarters overseas to find better corporate tax rates.
A handful of Democrats in Congress are hoping to curb a corporate exodus by threatening to withhold federal contracts from firms that shift their headquarters overseas to benefit from lower tax rates.
The law could be a major hit for Medtronic (NYSE:MDT), which plans to use its $43 billion acquisition of Covidien (NYSE:COV) to relocate its official headquarters from Minnesota to Ireland in a so-called “corporate inversion.” Just last year Medtronic won a $58 million Defense Dept. contract with 6 options to renew.
A quartet of Senators introduced a new measure, dubbed the “No Federal Contracts for Corporate Deserters Act,” to take some of the shine off of inversions. The bill would ban inverters from bidding for or winning federal contracts, saying that such companies have claimed as much as $1 billion in government dollars in the past 5 years.
There are already regulations on the books to restrict funds to inverters, but “just like with the tax code, corporations have begun to find loopholes in the contracting restriction,” according to a statement issued by Senator Carl Levin (D-Mich.).