Bermuda Tax Issue Grows Hotter.

Congress debates offshore tax advantages and ergonomic standards proposed by OSHA.

A group representing U.S. subsidiaries of foreign companies has joined in opposing H.R. 4192, a bill that would place additional taxes on U.S.-based insurance companies operating in Bermuda.

The bill is the work of U.S. Reps. Nancy Johnson, R-Conn., and Richard Neal, D-Mass., who seek to close what they describe as a "tax loophole" for U.S. insurance companies with affiliates in Bermuda. By moving their headquarters to Bermuda or by being acquired by a Bermuda insurer, the companies can escape a 35% U.S. income-tax rate and state rates as high as 5%.

But the bill would affect more than the insurance industry, people in and out of the industry said. In a letter to Rep. Bill Archer, R-Texas, chairman of the House Ways and Means Committee, the Organization for International Investment's executive director, Todd Malan, said his "members are concerned that this bill sets dangerous policy precedents and violates important international tax policy principles followed by the United States."

Archer oversees tax issues before the House, including H.R. 4l92, which is opposed by Bermuda-based insurers such as Ace Ltd. and XL Capital Ltd.

The organization, based in Washington, describes itself as the exclusive representative of the largest U.S. subsidiaries of companies based abroad. Part of its mission is to maintain an open environment for international companies in the United States. Its membership includes insurance companies, but they are a minority. Thus, "our concerns are based on considerations much broader than the targeted objectives of the bill regarding the insurance industry," Malan wrote to Archer.

What Malan doesn't like about the bill is that it "seeks to use the U.S. tax code to address a perceived 'unfair competitive advantage' of firms operating in another country."

He said that "as the largest source of foreign direct investment to the rest of the world, the United States should be very careful in the use of tax code to intervene in global competition."

The most compelling argument against H.R. 4192, Malan said, "is that it is not necessary."

Insurance industry representatives agreed that the bill affects more than the insurance industry and saw this as a plus in fighting its passage, making the voice of opposition louder and increasing the chances of defeating the bill.

Ergonomics Proposal Draws Fire

The Occupational Safety and Health Administration's proposed ergonomics rule might be illegal and would interfere with state workers' compensation laws and administration, U.S. Sen. Mike Enzi, R-Wyo., said during a Senate hearing on the national impact of the proposal.

Enzi, chairman of the Senate Employment, Safety and Training subcommittee, and several witnesses expressed fear that the proposed OSHA "work restriction protection" requirement would make employers pay compensation to workers removed from work or restricted temporarily because of repetitive-motion injuries.

Enzi noted that the Occupational Health and Safety Act prohibits OSHA from interfering with workers' comp regulated by the states, as he insisted the proposed rule would do.

But Charles Jeffress, assistant secretary for occupational safety and health with the U.S. Department of Labor, denied that the rule would result in the federal government interfering with how the states administer workers' comp or that the department was exceeding its statutory authority.

Jeffress said the current proposal would require employers to report and correct situations that endanger the health and welfare of workers.

The proposal would require that "workers who experience covered [musculoskeletal disorders] receive a prompt response from their employer, including an evaluation of the injury and access to follow-up by a health-care professional, if necessary," Jeffress told the subcommittee.

Additionally, the proposal would provide work-restriction protection for an employee when the company or its health-care professional has determined that the worker needs a change of routine because of musculoskeletal disorders, he said.

Most other witnesses before the panel took turns blasting the OSHA proposal and its authority.

Robert Aurbach, general counsel for the New Mexico Workers' Compensation Administration, saw the proposal as wreaking "havoc with the quid pro quo in every state and territorial workers' compensation system."

Additionally, it would create "dual filing of [worker] claims" through OSHA and the state, he warned. "At a minimum, I believe the...provisions should be held back. Congress has never authorized OSHA to substitute its judgment regarding post-injury for that of the state," Aurbach said.