03/18/2010 05:12 am ET | Updated May 25, 2011

U.S. PIRG Catches Tax Haven Loophole In Appropriations Bill

The U.S. Public Interest Research Group sent a letter Tuesday to members of a Senate appropriations subcommittee calling out a corporate tax haven loophole that popped up in appropriations legislation moving through the Senate.

U.S. PIRG's Nicole Tichon wrote that a Senate appropriations bill governing how U.S. agencies hand out contracts included a broad exemption that would allow "inverted corporations" to benefit from government contracts. Inverted corporations -- companies nominally headquartered overseas to dodge taxes -- have been banned from obtaining government contracts.

"This bill undermines a bipartisan, common-sense law, undoing the good that's been done," said Tichon in a statement. "The taxpayers, who've been carrying the financial rescue on their backs, will take on even more burden if this loophole becomes law."

Congress banned the Department of Homeland Security from contracting with tax dodgers in 2002. This year, Congress broadened the ban to apply government-wide, and the rule was implemented on an interim basis on July 1. Tichon says the language in the Financial Services and General Government Act of 2010, which landed on July 7, would blow up efforts to squash tax cheats.

Check out the bill on the Subcommittee on Financial Services and General Government's website. The offending language goes like this: "The prohibition... shall not apply to the extent that it is inconsistent with the United States obligations under an international agreement."

"Though 'agreement' is a nebulous term," writes Tichon, "it is presumed to mean the World Trade Organization's Government Procurement Agreement, but could be interpreted as wide as Trade Agreements, Trade and Investment Agreements or even Tax Treaties."

The letter lists nations that are parties to those agreements -- many of them, such as the Cayman Islands, are known tax havens.

So, LobbyBlog wants to know -- what happened? How'd this language get into the bill?

Click here for a PDF of U.S. PIRG's letter.