The Treasury Department has spent millions of dollars on federal contracts for companies that have shifted their legal address abroad, even as the Obama administration pushes to rein in the practice.
Just last month, Treasury Secretary Jack LewJack LewOvernight Finance: House GOP plans short-term spending bill | Senate Republicans not happy | Yellen intends to finish term Lew: Don't paint Wall Street execs with 'broad brushstroke' Dumping Obama’s faux foreign tax legislation should be high on Trump's to-do list MORE moved to limit the appeal of those tax deals, known as inversions, after Democrats sharply criticized a new wave of potential mergers in the heat of the midterm election season. Democratic lawmakers are also seeking to stop U.S. companies that have moved offshore from getting federal contracts.
For instance, the department gave roughly $4.8 million between 2012 and 2014 in contracts to Tyco, a security firm that went to Bermuda in 1997 and is now in Switzerland.
Aon has received more than $3 million from Treasury since it moved its headquarters to London in 2012, according to data from the Federal Procurement Data System. The insurance brokerage, which has received more than $16 million in contracts from Treasury since President Obama took office, is one of close to 50 companies to invert in just the last decade, according to the Congressional Research Service.
Treasury officials say that they follow all relevant contracting rules. A spokeswoman for the agency added that the department’s new anti-inversion rules “were not intended to target any specific deal, but instead are in response to the increasing number of these transactions across a broad range of industries.”
Those rules, which make it harder for companies to access cash stashed offshore without paying taxes, are already having an effect. AbbVie, a U.S. pharmaceutical company, dropped a potential $55 billion merger this week, blaming the new Treasury regulations in the process. Treasury, AbbVie said, “reinterpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions.”
But even with the success of the new rules, the Aon and Tyco contracts – which represent just a portion of the contracts that Treasury has handed out to companies that moved their headquarters abroad in recent years – underscore how entwined many of the corporations that already went offshore are with the U.S. government.
The contracts are also just one way that the administration’s message has become muddled over inversions, after top Democrats this summer questioned the patriotism of companies that sought offshore tax deals and Obama himself labeled those that left “corporate deserters.”
Accenture, which has set up shop in Switzerland, Bermuda and now Ireland, received what’s become a nine-figure contract to shore up HealthCare.gov, the federal insurance site key to the president’s healthcare law. Accenture and the Government Accountability Office have both said the company never inverted, but the contractor has long been labeled a tax dodger by Democrats and its status shows how complex a company's tax residence can be.
A spokesman for Tyco said the company was “in compliance with any laws and regulations related to government contracting,” and that federal contracts in general only account for about 1 percent of the company’s global business.
Tyco had about $10.6 billion in revenue in 2013, and the federal procurement system lists them as having signed about $100 million worth of contracts that year. The company signed almost $2 million worth of contracts with Treasury’s comptroller of the currency last year, for a variety of security measures.
The almost $5 million in contracts Treasury gave to Tyco between 2012 and 2014 were split between Tyco Integrated and ADT, which became an independently traded company after splitting off from Tyco in 2012.
An Aon spokesman didn’t respond to multiple requests for comments. Roughly two-thirds of the more than $3 million in contracts the company received from Treasury since its inversion have been for the IRS, with most of the rest going to the Troubled Asset Relief Program. The IRS and TARP also account for the vast majority of Aon’s contracts with Treasury since Obama took over in January 2009.
Republicans and Democrats in Congress remain divided over how to deal with inversion transactions. Democrats are pushing legislation that would basically only allow U.S. companies to shift their legal address abroad if they merge with a larger foreign competitor.
In a separate proposal, Democrats are also seeking to change the contract rules that Treasury is following, to stop inverted companies from getting federal contracts.
Republicans, among other issues, believe that the Democratic efforts could force companies that have inverted – but kept much of their operations in the U.S. – to move even more of their business offshore.