TRENTON — Legislation sponsored by Senator Shirley Turner that would deny taxpayer support to companies that engage in corporate inversions as a tax-avoidance scheme was approved today by the Senate State Government, Wagering, Tourism and Historic Preservation Committee.
Under S-1513, businesses that merge with foreign companies to shift their income overseas in a tax-avoidance scheme, known as a “corporate inversion,” would be disqualified from receiving state contracts or subsidies.
“The taxpayers of New Jersey should not be in the position of subsidizing companies that are gaming the tax system to avoid paying their fair share,” said Senator Shirley Turner (D-Hunterdon/Mercer). “We need to put an end to the practice of awarding taxpayer-subsidized contracts and subsidies to wealthy corporate tax dodgers. It’s an injustice to our taxpayers. These companies benefit from our infrastructure, an educated workforce, our research, and so many programs and services that our tax dollars support, yet they avoid contributing their fair share and also expect a handout. It’s time we wised up and stopped being hoodwinked.”
The drug company Pfizer attempted to take advantage of this tax loophole, when in 2015 it announced plans to move overseas in a merger with the Irish company Allergan. The deal between the companies was called off earlier this year after the Treasury Department took action to try to curb the issue. It was reported by the LA Times that the merger was influenced by the company’s being able to dodge taxes.
The state-funded contracts and subsidies would be denied to any 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 for the primary purpose of avoiding United States taxes. The ban would also apply to funds from independent state authorities.
A study by U.S. PIRG found that states lost more than $39 billion in tax revenue to these corporate tax dodgers in 2011 and that New Jersey was among the top five losers.
A number of inverted corporations have already benefitted from New Jersey’s business incentive programs, including Tyco International, Inc., which received a $15.4 million Business Employment Incentive Program (BEIP) grant in 2003. Pfizer, which has pursued tax inversion transactions, has received a total of $48.28 million in BEIP and other incentives. Dey Pharma, L.P., Mylan Inc. and Affiliates received a $1.09 million BEIP grant in 2009 and Abbott Laboratories has also benefitted.
S-1513 cleared the committee 3-1-1 and will next head to the Senate Budget and Appropriations Committee for further consideration.