Bermuda-based corporations are among those targeted by legislation approved by the US House of Representatives this week.

The legislation was part of a jobs bill that went before the House on Wednesday, which will attempt to raise $7.7 billion from corporations who funnel their US profits through offshore affiliates to cut their US tax bill.

The provision targets countries that do not have a tax treaty with the US, such as Bermuda and the Cayman Islands.

Domiciles including Ireland and Switzerland, which have treaties with the US, will not be affected by the change.

Although Bermuda has had a tax information exchange agreement in place with the US for more than 20 years, as well as a mutual legal assistance treaty, there is no tax treaty.

The measure, if enacted, would make it more attractive for Bermuda companies with US subsidiaries to move their holding companies to a country that has a tax treaty with the US.

The latest in a series of US "jobs bills" intends to provide billions of dollars to state governments for construction projects and welfare programmes, funded partly by the tax provision.

The House passed the measure by 246 votes to 178, with nearly all Republicans opposed. It now goes to the Senate.

Bermuda has seen a series of corporate departures to other jurisdictions by large firms that did much of their business in the US and had a minimal presence on the Island. These include Tyco International, Tyco Electronics, Accenture, Covidien, Transocean and Weatherford International. Most moved their corporate domicile to either Ireland or Switzerland.

This is the type of company that the provision appears to target, rather than the Island's international insurers, which are among the targets of a separate bill tabled by Representative Richard Neal.

"If I were a multinational tax dodger, I would think my taxes had gone up under this bill, and they should," said Texas Democrat Lloyd Doggett, who wrote the provision.

According to Nancy McLernon, president of the Organisation For International Investment (OFII), the measure is likely to meet significant opposition in the US Senate. OFII represents the interests of non-US companies with subsidiaries in the US.

"OFII has opposed it, the US Treasury Department has opposed it and even the Obama administration opposes it," Ms McLernon said. "The Senate has also opposed it before, as a treaty override."

The US Senate is the country's tax treaty ratification body and thus is reluctant to override tax treaties it has approved in the past.

She explained how the Doggett provision would work in practice. "If a Bermuda-headquartered company has an affiliate in the UK, which then loans money to its US affiliate, the transfer between the UK and US affiliates would no longer be able to access the benefits of the US-UK tax treaty," Ms McLernon said.

Because the ultimate parent was based in Bermuda — and the Island has no tax treaty with the US — the US-UK tax treaty would be overridden in this case under the proposed legislation.

The provision discriminates against countries with no tax US treaty. Ms McLernon explained that if the holding company of the hypothetical UK affiliate had been based in Japan, the UK-US tax treaty would have applied, since Japan has a tax treaty with the US.

However, as the provision is built into a bill that purports to create jobs and gives capital gains-tax breaks to small businesses, it might be politically difficult for Democrat Senators to vote against it.

The Senate shuts down next week for the two-week Easter recess and Ms McLernon said OFII would be taking advantage of the break to educate Senators on the potential consequences of the provision for foreign investment in the US.

"There are many members of the Senate who do not believe this provision will meet its goals," Ms McLernon said. "But if it's part of a bill that's highly supported, then it does become more difficult."