WASHINGTON (DOW JONES NEWSWIRES) House Democrats have resumed efforts to deny contracts from the US Department of Homeland Security to companies that have moved their headquarters abroad to avoid paying US taxes.

On Tuesday, in the House Appropriations Committee, they succeeded in amending a $29 billion annual spending bill for the department to deny such contracts to the parents and subsidiaries of any company that has engaged in a so-called corporate inversion transaction.

In such a transaction, a US company sets up a subsidiary abroad, typically in a country with which the US hasn't negotiated a tax treaty. The subsidiary then acquires the assets of the parent, effectively becoming the parent, thus inverting the corporate structure and allowing the company to reduce its US corporate taxes.

A flurry of these transactions took place shortly before and after the September 11, 2001, terrorist attacks on the US, prompting an outcry from consumers and some lawmakers that the businesses were abandoning the nation in a time of need.

Cooper Industries Inc., Ingersoll-Rand Co., Nabors Industries Ltd. and Seagate Technology Inc. all completed corporate inversion transaction after Sept. 11, 2001.

Stockholders have generally been supportive of the transactions. For example, a substantial majority of Cooper Industries' shareholders approved the restructuring that moved its place of incorporation from Ohio to Bermuda when it came to a vote in May 2002.

Of the 93 million shares outstanding and entitled to vote at the meeting, 68.3 percent voted in favour of the proposal. Of the nearly 70 million shares voted at the meeting, 90.8 percent voted in favour of the proposal.

Lawmakers had considered legislation that would have blocked Cooper and other inverted corporations from enjoying any tax benefits from the transactions, but in the face of Republican opposition the legislation stalled. Republicans argue that corporate inversions are symptomatic of a broken tax system. They say companies shouldn't be punished, but the tax system should be fixed.

Congress did add a contract restriction to the bill creating the Homeland Security Department, signed into law November 25, 2002. But Republicans watered down the provision to apply only to the parent corporation located abroad - not to its US subsidiaries - and only to corporations that had inverted after November 25, 2002.

"In the light of day, it isn't hard to find bipartisan support for this provision punishing those companies who run offshore to avoid US taxes," said Rep. Richard E. Neal, a Democrat from Massachusetts. "The real test, of course, will occur later when the Republican leaders meet behind closed doors and will be, once again, tempted to kill this commonsense provision."