Senator Chuck Grassley, the incoming chairman of the Senate Finance Committee and a vehement opponent of corporate inversions, has renewed his pledge to crack down on corporations which reincorporate in jurisdictions such as Bermuda to save money on taxes, according to a report on the Hearst News Service.

Grassley has already tried to get a measure which would ban the measure passed in Congress. His proposal is banking on support from patriotic Americans and disgust at recent corporate scandals.

The Reversing the Expatriation of Profits Offshore (REPO) Act would have eliminated the tax benefits of moving offshore by requiring US companies that reincorporate to continue paying the same taxes if their assets remain "substantially the same" and more than 80 percent of the shareholders of the new company were also shareholders of the old company. Congress estimates that REPO would provide the US government with an extra $2.2 billion in corporate take over ten years.

Tyco International, which reincorporated in Bermuda in 1997, said it saved $400 million in taxes last year.

"It's wrong for some to stay and pay; and others to dash and stash the cash," Grassley said.

The companies which reincorporate save because they do a substantial portion of their business outside the United States.

Firms incorporated in the US must pay tax on their worldwide income; firms which reincorporate offshore are only required to pay tax on earnings generated in the United States. Those who reincorporate believe that by doing so, their company is given the same advantage enjoyed by European and Asian companies with subsidiaries in the US, but who do not have to pay tax on their worldwide income.

But Herb Henkel, the chief executive of Ingersoll-Rand, one firm which reincorporated in Bermuda, believe that critics of his companies should worry about why the move makes sense for some US companies, according to a report in Forbes magazine.

"If the tax laws were different, we wouldn't have moved in the first place," he was quoted as saying in Forbes.

Forty percent of Ingersoll's sales are made abroad, and Henkel expects two-thirds of growth to come from outside of the United States.

The firm's annual tax savings amounted to about $50 million in 2002, according to Forbes.

Opponents of corporate inversions, including California State Treasurer Philip Angelides, who banned the state from owning Ingersoll debt and prompted the state employee pension fund to urge Ingersoll to repatriate, say the real motivation for moving offshore is to strip profits from US operations. Corporations do this by loading the US subsidiary with debt payable to the foreign parent and deducting the interest from the taxable income of the subsidiary.

Henkel admitted that Ingersoll strips earnings, but said that it accounts for less than half of the total tax benefit.