Ensign bill on foreign investors passes Senate

Suzanne Struglinski

Thursday, May 13, 2004 | 11:03 a.m.

WASHINGTON -- A newly passed Senate bill contains a provision backed by Sen. John Ensign, R-Nev., that would give American companies with foreign operations a tax break for taking money earned overseas and investing it in the U.S.

The Senate approved a large tax bill Tuesday, which included Ensign's "Invest in the U.S.A." bill. The legislation provides a one-year window for American companies to bring money made overseas back to the U.S. at a 5.25 percent tax rate.

Under current law, if a U.S. company has a factory or offices in another country and wants to bring money earned there back to the United States to invest, the corporate income tax rate can be as high as 35 percent, Ensign said.

Ensign's proposal will give companies a chance to bring their money -- and jobs -- back home for a much lower rate, he said. The money brought back could be used for company expansion or research and development but not to increase salaries of company executives, according to Ensign's office.

"People are talking about outsourcing jobs from the United States, this is about insourcing jobs into the U.S.," he said.

Some Democrats claimed Ensign's plan is a giveaway to wealthy corporations that already have moved jobs overseas.

Last week, the Senate defeated an attempt by Sen. John Breaux, D-La., and Dianne Feinstein, D-Calif., to have companies create a "domestic reinvestment plan" before they would be able to get the tax break.

Breux and Feinstein wanted a mechanism that would ensure companies bringing money back to the U.S. as a result of the tax break used it for job creation, funding pension plans or other purposes that would stimulate the economy, "not just increase corporate profitiability," according to a summary of the amendment.

"That is an 85-percent tax reward to companies that have stashed money in tax havens, in many cases overseas, for the sole purpose of avoiding U.S. taxation," Breaux said on the Senate floor last week.

Breaux said U.S. companies earn money in one country and then take it to Barbados, the Caymans Islands, Bermuda and other "tax havens" to avoid paying the U.S. tax.

"My amendment says: All right, companies, if you bring it back for those purposes, we want proof you actually use it for those purposes. You can use the next 3 years to take these billions of dollars and use it for legitimate purposes, but we would like some proof. We know it by seeing you have actually spent more in the next 3 years in these areas than in the previous 3 years. That is very important," Breaux said.

Ensign's office estimates the act could bring $400 billion to $600 billion to the U.S. economy and could create up to a million jobs.

"We need to encourage American companies to invest their assests here at home, and to eliminate a tax policy that puts us at a disadvantage when it comes to competing with other countries," he said.

Ensign said he has talked with close to 40 companies that have shown interest in taking advantage of the tax break. He said Texas Instruments may build a new plant in Texas costing $1 billion.

In Nevada, a company he wouldn't name could invest $150 million back in its U.S. operations, the state's junior senator said.