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N.J. lawmakers seek to discourage corporate tax maneuver

TRENTON A New Jersey legislative panel on Thursday advanced a bill that would prohibit the state from awarding contracts or incentives to companies that reincorporate overseas for the purpose of avoiding U.S. taxes.

TRENTON A New Jersey legislative panel on Thursday advanced a bill that would prohibit the state from awarding contracts or incentives to companies that reincorporate overseas for the purpose of avoiding U.S. taxes.

The move comes as the federal government has sought to crack down on so-called inversions, in which companies restructure abroad without moving their headquarters.

A number of U.S. companies, such as Burger King, in recent months have moved to buy firms in other countries so they can incorporate there and lower their tax bills in the U.S.

This practice "does our whole economic structure a disservice," Assemblyman Troy Singleton (D., Burlington), the bill's sponsor, told the Assembly Commerce and Economic Development Committee Thursday.

"What we're trying to do today is send a strong message that companies who choose to use this business tactic, as it's been couched to me, should not benefit in our estimation from state contracts or state development subsidies or state grants," he said.

If the bill were to pass the Democrat-controlled Legislature, Republican Gov. Christie would almost certainly veto it. A spokesman for the governor declined to comment on the bill.

Under the legislation, businesses seeking state contracts or incentives would have to attest to their legal status, as determined by the U.S. Treasury Department or Internal Revenue Service.

A firm that wins a grant and later becomes inverted would have to repay the money, the bill says. Singleton said the measure would not be retroactive to businesses that have already inverted.

Foreign companies that invest in New Jersey wouldn't be affected, he said.

Republican legislators said the state should instead reform its tax policies and regulations to encourage investment here.

David Brogan, first vice president of New Jersey Business and Industry Association, told the panel that the underlying cause of inversions was the "oppressive federal tax rate."

He said the bill would send the "wrong message to the business community."

Michael Egenton, senior vice president of government relations for the state Chamber of Commerce, said in an interview that more than a dozen major companies that operate facilities in New Jersey and abroad had contacted him to voice concerns. He declined to name the firms.

Singleton pointed to Tyco International, a security systems firm, as an example of a New Jersey company that had inverted abroad. It relocated to Bermuda in 1997 and maintains its U.S. headquarters in Princeton.

The committee passed the bill on a 7-3 vote. It now heads to the Appropriations Committee.

aseidman@phillynews.com

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@AndrewSeidman