Patriot tax legislation in the US - which could adversely affect companies that reincorporate in Bermuda - has a real chance of being passed in to law according to a New York Times report on Monday.

The story written by David Rosenbaum, said: "The legislation is driven by public anger over the collapse of the Enron Corporation, which escaped millions of dollars in taxes by creating subsidiaries in countries that are tax havens, and has gained so much momentum that it stands a chance of becoming law this year, despite the opposition of Republican leaders in the House of Representatives and the lack of enthusiasm in the Bush administration."

Although Bermuda was reportedly home to less than ten percent of failed energy giant Enron's subsidiaries - with 881 subsidiaries worldwide; eight in Bermuda, 692 in the Cayman Islands, 119 in the Turks and Caicos and 43 in Mauritius - the Island has been in the spotlight from both US legislators and the media over the issue of American corporations moving offshore to shave money off their tax bills. The controversy has centred around such companies as Tyco, Global Crossing, Ingersoll-Rand, Cooper Industries and Stanley Works, which are companies that have either moved to Bermuda or stated their intention to reincorporate on the Island. In the House Rep. Richard Neal and Rep. Scott McInnis have put forward draft legislation. In the US Senate, Sen. Max Baucus and Sen. Charles Grassley, who are the chairman and top Republican, respectively, on the finance committee, plan to move a bill through the panel this month that would prevent companies that reincorporate in tax havens from escaping US taxes if they had no substantial business in the place of reincorporation. In addition, the New York Times reported that when a tax measure has the strong support of the chairman of the finance committee and the top senator from the minority, it gets clear sailing through the Senate.

Looking at the push for this legislation, the Times said some of the strongest support has come from Connecticut, the present home to Stanley Works: "Nowhere is the political force behind the legislation clearer than in Connecticut, where because of reapportionment, Representatives Jim Maloney, a Democrat, and Nancy Johnson, a Republican, have been forced to run against each other for re-election.

"The issue is especially pertinent in the new district because Stanley Works, which makes hammers and other hand tools and has been based in New Britain, Connecticut, for more than 150 years, is planning to reincorporate in Bermuda, which has no income tax. Stockholders will vote on the move tomorrow."

The Times piece reported further: "Many other companies have created nominal headquarters in Bermuda in recent years or are planning to do so. Mr. Maloney and Mrs. Johnson are among the sponsors of legislation that would lift the tax advantages these companies enjoy.

"Mr. Maloney has been the more outspoken of the two. He calls the move by Stanley Works, which has not had a factory in Connecticut for years, "deeply unpatriotic and deeply damaging to the state of Connecticut and to our country".

The New York Times story also reported that given it is an election year, the tax issue may be especially pertinent as it bears on votes: "Geoffrey Garin, a Democratic pollster who recently surveyed 1,001 likely voters in the 33 most competitive Congressional districts to determine what issues they felt most strongly about, said tax shelters were among the matters that upset voters most."

In the House, Rep. Bill Thomas, a Republican who is chairman of the ways and means committee, holds that the use of tax havens is a symptom of problems with the corporate tax code generally, not one that should be addressed absent an overhaul of the entire code.

As a rule, legislation does not come out of the ways and means committee without the chairman's imprimatur. But if the Senate approves a tax haven bill soon, Mr. Thomas, could have his hand forced by election-year politics, according to the Times story.

Rep. Neal, as chief sponsor of the House legislation, has said: "If we can get this bill on the House floor, I promise you, it will get 300 votes." The House has 435 members.

At the Senate hearing in March, Mark Weinberger, then chief of tax policy at the Treasury Department, was cool to the idea of a specific law against tax shelters. He left office last month however and has not yet been replaced.

And the New York Times reported some shift on the matter from the Bush administration: "The administration's view seems to have shifted somewhat since March.

"A Treasury spokeswoman, Tara Bradshaw, said the position now is that tax havens are 'an important issue' that the Treasury is studying.

"We will be working with Congress and the Internal Revenue Service (IRS) to develop and implement an appropriate course of action as quickly as possible," Ms. Bradshaw said.