Two California state senators have joined Treasurer Phil Angelides' corporate governance campaign and are introducing bills that would penalize U.S. firms that have moved their headquarters offshore by cutting them out of lucrative state contracts and closing loopholes in the state tax code.
Senate President Pro Tem John Burton (D-San Francisco) has introduced a bill that would prohibit state agencies from doing business with the so-called expatriate firms, companies that have moved their legal headquarters to offshore tax havens such as Bermuda or the Cayman Islands.
Sen. Jackie Speier (D-Hillsborough) said Tuesday that she plans to introduce a bill that would change California's tax code to restrict the ability of these firms to shift income abroad to avoid paying state taxes.
Critics of such companies have launched a similar effort in Congress to revise the federal tax code. The companies say they are only seeking the tax relief because they have large global operations and are disadvantaged under the current U.S. tax system.
Prominent U.S. companies such as Accenture Ltd., the management consulting firm, and Ingersoll-Rand, the industrial machinery giant, have lucrative contracts with the state and could be affected by the proposed legislation, according to one legislative staffer who asked not to be named. Officials at those companies could not be reached late Tuesday for comment.
There are dozens of U.S. companies, out of several thousand publicly traded ones, that have their legal headquarters in Bermuda or the Caymans. Others include Global Crossing Ltd., the telecommunications giant formerly based in Beverly Hills; McDermott International Inc., Tyco International and Xoma Corp., a biotechnology firm in Berkeley.
A spokesman for the state treasurer's office said Tuesday that he did not know how many companies would be affected by the proposed laws. The state Franchise Tax Board estimated that California would collect an additional $10 million a year if Speier's bill is passed.
The senators are scheduled to announce their collaboration with Angelides, the sponsor of both bills, today at a news conference in Sacramento. Art Pulaski, executive secretary treasurer of the California Labor Federation, AFL-CIO, also is backing the initiative, according to the state treasurer's office.
Angelides has been one of the most prominent backers of a national campaign to pressure expatriate firms to return to the United States.