Companies Get Billions From Taxpayers

American manufacturer Ingersoll-Rand Co. (IR) forged the tools that carved the Panama Canal and shaped Mount Rushmore. When it shifted its legal address to Bermuda in 2001 to reduce taxes, the maneuver sparked bipartisan outrage in Congress.

“These corporations have turned their back on their country,” Nevada Democrat Harry Reid fumed from the Senate floor, adding that his father, a hard-rock miner, had wielded an Ingersoll-Rand jackhammer. “There is no reason the U.S. government should reward tax runaways with lucrative government contracts.”

Over the next dozen years, Congress passed law after law to prohibit American companies that reincorporate overseas from doing business with the federal government.

Those laws haven’t worked. 

Benefiting from loopholes and a cooperative Obama administration, the companies avoid the ban on federal contracts as effectively as they avoid U.S. taxes.

Ingersoll-Rand continues to score federal work worth hundreds of millions of dollars, touting projects for the Army and Navy in sales brochures. The company’s strategies have even included trying to piggyback on the eligibility of other companies, according to two former Ingersoll-Rand employees.

Even as Ingersoll-Rand reaped the tax benefits of its foreign address, it took steps to expand its U.S. government business. In December 2007, two weeks before the first government-wide contracting ban took effect, Ingersoll-Rand agreed to buy Trane Inc.

Ingersoll-Rand is one of more than a dozen large U.S. companies that have shifted their tax addresses offshore yet still earn federal business, a Bloomberg News investigation has found.

In all, these companies are collecting more than $1 billion a year from the government, even as their tax-avoidance techniques have deprived the Treasury of untold billions of dollars in revenue.

Regulators rely on the companies to police themselves for compliance with the prohibition. At least three companies -- Xoma Corp., Cooper Industries Plc and Foster Wheeler AG (FWLT) -- have acknowledged they were subject to the ban and yet have said in a federal database that they’re exempt.