IRS: Companies avoiding U.S. taxes by moving their headquarters offshore

[forum_admin]

IRS Moves to Keep Companies From Skirting Tax-Avoidance Law

The Internal Revenue Service is moving to bolster enforcement of a 2004 law that bars companies from avoiding U.S. taxes by moving their headquarters offshore.

The tax agency said in a notice that it has “become aware” of transactions designed to subvert a test that determines whether a company’s move offshore was for legitimate business reasons or just to avoid U.S. taxes.

“These transactions are inconsistent with the purposes” of the 2004 law, according to the IRS notice, which banned them starting Sept. 17.

The action is the IRS’s latest effort to stop practices that let U.S. companies including Tyco International Ltd., Foster Wheeler AG and Noble Corp. avoid taxes by establishing nominal headquarters in low-tax countries such Bermuda and the Cayman Islands while keeping their operational headquarters in the U.S.

Congress banned the practice in 2004 by requiring U.S. companies with offshore headquarters to continue paying U.S. taxes when at least 80 percent of their ownership remains the same as before the move.