corporate segregation by inversion

businessweek |  More than 40 U.S. companies have reincorporated in tax havens, a strategy known as inversion, 11 of them since 2012. Seven more are in the process of doing so. Last month, Medtronic (MDT), a Minnesota medical device maker whose customers include the Veterans Affairs Department, announced plans to become Irish. The government awards more than a dozen companies that have left the U.S. contracts worth more than $1 billion a year. 

The law defining inverted companies doesn’t cover Accenture, a company with Chicago roots that incorporated in Bermuda in 2001. The same is true for Chicago Bridge & Iron (CBI), a Texas-run corporation with a Dutch address. According to public records, Accenture earned $960 million from federal contracts in 2013, and CB&I made $734 million. A spokesman for CB&I says the company complies with the law. Accenture spokesman James McAvoy says the company is eligible for government contracts because it was never incorporated in the U.S. When it first separated from Chicago-based Arthur Andersen in 1989, it was set up as a network of separate partnerships around the world overseen by a Swiss entity. For that reason the U.S. General Accounting Office concluded in 2002 that Accenture wasn’t an inverted company. McAvoy says a 2012 review by the U.S. Department of Homeland Security confirmed that Accenture, now based in Ireland, isn’t subject to the ban.

In its brochures, Ingersoll-Rand touts its projects for the Army and Navy. Yet for years it told shareholders and customers in public filings that it might be subject to the law. Recently the company conducted an “exhaustive legal analysis” and decided it’s not covered, says spokeswoman Misty Zelent. The government relies on contractors to police themselves. Zelent says the company works closely with government contracting officials to ensure compliance with a “complex area of the law.” Its contracts show just how complex it is and how many legal ways there are around the rules.