U.S. tech firms’ $100M tax shelter offers tax-free savings to workers, says Senate report

Analysts say a federal tax shelter that helps companies avoid paying taxes could offer workers tax savings of more than $100 million per year, while leaving workers more vulnerable to being audited by the IRS.

A panel of experts in the Senate Finance Committee’s tax-writing subcommittee is expected to recommend a plan to the full Senate later this month that would give tax-exempt tech companies a special tax break called a “corporate tax shelter” that would allow them to shelter more of their profits overseas while still paying federal income taxes.

The plan would also let them shelter up to $1 million in their U.N. tax shelters that they have set up in the United States, but the panel has not made a recommendation on how much they could shelter.

For years, many tech companies have been able to skirt U.T.S.-based taxes by using subsidiaries in Bermuda, Ireland or the Cayman Islands.

That loophole is expected be closed this year by the Obama administration, but companies still can hide profits in the Caymans and the U.K. tax haven for up to five years, according to The Wall St. Journal.

“This shelter could help tech companies escape U.L.G. taxation for up-front cash-flow costs that could ultimately be more than offset by tax savings from the lower tax rates that apply to technology and other companies,” said Peter D’Amico, a senior tax adviser at Covington & Hamilton LLP, who advises large U.P. firms on their tax affairs.

Companies can also use the corporate tax shelter to avoid paying tax on foreign income that is earned in the U, including the tax on profits that are earned abroad.

The corporate tax shelters have become popular for tech companies because they allow them a way to save money that can be passed on to employees in the form of lower payroll taxes.

They have been a boon for companies like Apple Inc., which has reported an annual $2.2 trillion in revenue since 2009.

But the corporate taxes are still not a tax break for workers, and many workers are already paying more taxes than they can afford, according the Senate subcommittee.

In 2010, Congress passed the Corporate Tax Reform Act, which created a special federal tax credit called the “corporations shelter” for technology companies that make more than a certain amount of money from U.R.S., such as software development, patents and sales.

At the time, the corporate shelter cost taxpayers about $100 billion per year.

This year, Congress also passed the Small Business Investment Act, a $2 trillion tax cut that gives businesses more than 1.3 million tax credits worth more than 4 trillion dollars.

If the Senate panel is able to pass its plan, technology companies could save up to nearly $3 billion a year on U.U.

S, and the government could offset that savings with the tax savings for their ULL employees, according Sen. Elizabeth Warren (D-Mass.) and Sen. Richard Blumenthal (D,Conn.).

The Senate panel will make its recommendation in December.

Follow USA TODAY tech reporter Jennifer Doyon on Twitter: @jen_doyon.