US companies looking to reincorporate in Bermuda and other tax-friendly jurisdictions face another potential barrier after a bill imitating the so-called Patriot Act was introduced in Congress last week.

On Thursday, a week after her husband opposed Stanley Works reincorporating in Bermuda, US Rep. Nancy Johnson, R-6th District, introduced a bill that would block the New Britain company from changing its legal residence on paper to avoid paying federal taxes.

Johnson's proposal calls for a two-year moratorium on any US companies that incorporated out of the country on September 11, 2001 or after to avoid federal tax obligations.

The US is currently one of a handful of countries that taxes on foreign-sourced income, and companies argue that in the global economy this makes them uncompetitive, prompting moves to a more tax-friendly environment. Companies say they can reduce their tax costs from about 35 percent to between 25 and 20 percent by moving to more tax-friendly environments like Bermuda.

Johnson described the bill as a stopgap measure in case the Patriot Act - which provides a permanent fix and has already been proposed in Congress - bogs down in debate.

Last week another version of the Patriot Act was put before Congress for vote for the first time, but did not get past the starting blocks. The bill was piggybacked on to another piece of legislation to give tax relief to married couples in a bid to get it passed before the end of session.

US Rep. James Maloney, D-5th, Johnson's opponent and a sponsor of the competing Patriot Act, called Johnson's bill an imitation and suggested that partisan politics more than complexity may delay the proposal he and Massachusetts Democrat Richard Neal sponsored earlier this year.

In a poll last week, Stanley's shareholders overwhelmingly voted to reincorporate in Bermuda. Largely a paper transaction, the reincorporation would change Stanley's legal residence without moving the company's New Britain headquarters and save the company about $30 million in federal taxes, officials have said. The outcome provoked national exposure and criticism. Stanley has promised a second vote, but Gould said the vote has not been scheduled. Johnson admitted that her husband, who owns 1,667 shares of Stanley stock, had voted against the move an admission that highlighted Johnson's perceived closeness to the company based in her hometown.

Maloney said Republicans stood in the way of Democratic legislation, leaving open the loophole that is allowing corporations to abandon their US responsibilities.

The Republicans had an opportunity to pass our legislation, but they didn't, Maloney said. Instead, they cancelled a vote on a very important bill to speed up marriage penalty tax relief for millions of American families just because (they) learned that Democrats had submitted an amendment to close the Bermuda tax loophole

For little more than the cost of a post office box in an offshore tax haven like Bermuda, US companies are avoiding many millions of dollars in federal taxes, he said.

Corporations that engage in this practice want the benefits of being an American company, but are not willing to pay their fair share. They leave that to taxpayers like you and your neighbour.

Maloney, however, did acknowledge the possibility that Johnson's bill faced fewer obstacles than his proposal, but not due to its simplicity. He attributed the clearer path to who its author was. Republicans hold a majority in the US House of Representatives. Johnson, a Republican, is engaged in one of the closest congressional races in the nation. Her proposal might generate more support among the majority party than his, he acknowledged.

But even if her bill goes through, Maloney said he will treat that as a success. If that's the way we succeed, it's good for Connecticut and good for our country, Maloney said.

It's just a moratorium, Johnson said, explaining the difference between her proposal and the Neal-Maloney bill.

I am a co-sponsor of the Patriot Act. I absolutely support it. But mine is more simple. It's harder to get a permanent change in the tax code. Looking at the reality, we need to have this moratorium capability because there may be a lot of members who have a lot of questions (on the Patriot Act) she said, explaining why she thinks her idea faces better odds of success.