The vote by the California Public Employees’ Retirement System (CalPERS) will call on three firms to let shareholders vote next spring on whether the firms should repatriate to the US. The firms include:
- McDermott International
- Tyco International
McDermott has a Panama tax home, while the other two have Bermuda addresses.
The shareholder votes were first proposed to the companies by the American Federation of State, County and Municipal Employees, one of the largest unions in the country, according to Reuters.
By acquiring an offshore headquarters and then holding an annual board meeting in a country with a favorable tax treaty, companies can earn profits tax-free in the United States. Even those that do not use the tactic can reduce taxes on profits earned in the United States by deducting fees to their offshore parent that would otherwise be treated as profits, according to Reuters.
According to the report, California state treasurer Philip Angelides believes he has the vote to support the three shareholder resolutions and, “After this we are going to move on” to the boards of the pension funds for California teachers, county boards, and many state pension boards around the country.
In July, Angelides, who also sits on the board of the California State Teacher’s Retirement System (CalSTRS), announced his desire to pull state money out of companies that leave the US for offshore tax havens, proposing a “blacklist” of 23 companies that have undertaken such moves to avoid taxes (see Cal. Treasurer Targets Firms Heading Offshore ).
In August, New Britain, Connecticut-based Stanley Works pulled back from a proposed move to reincorporate in Bermuda (see Stanley Stays Put ) after coming under fire from workers and state regulators, including Richard Blumenthal, the nutmeg state’s attorney general, and Denise L. Nappier, the state’s treasurer (see Connecticut Treasurer, AG Challenge Stanley Works – Again) .
In June, the Senate Finance Committee approved a bill that would treat companies that are considering or that have made a change in their legal address since 1996 to offshore tax havens such as Bermuda as if they never left. However, since then congressional fervor opposing such moves seems to have quieted. In fact, last week House Republicans put forth a measure allowing companies with offshore headquarters to win contracts from the proposed Homeland Security Department, as long as the work was performed by an American subsidiary.