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Delphi to contest pressure to file U.S. taxes despite UK tax base

(Reuters) – Auto parts supplier Delphi Automotive Plc said it would “vigorously contest” pressure by U.S. tax authorities to file taxes in the United States as a domestic company, when its tax base is in the UK.

Delphi, which operates out of Detroit, is one among several American companies locked in a battle with the Internal Revenue Service over the use of offshore tax shelters.

Mylan Inc said on Thursday it would go ahead with the purchase of some non-U.S. businesses from Abbott Laboratories despite the political opposition to tax-inversion deals.

The IRS told Delphi in June that it would be taxed as a U.S. company due to the sale of its assets to Delphi Holdings LLP after it emerged from bankruptcy in 2009, Delphi said in a regulatory filing on July 31.

Delphi said it was reincorporated in the UK as a limited liability partnership, which allows it to save tax. The company said it had filed U.S. federal partnership tax returns between 2009 and 2011.

“We will continue to prepare and file our financial statements on the basis that neither Delphi Automotive LLP nor Delphi Automotive Plc is a domestic corporation for U.S. federal income tax purposes,” the company said in the filing.

U.S. President Barack Obama and Congressional Democrats have proposed measures to stem the flow of so-called “inversions”.

The IRS contends that U.S.-based companies operating globally are manipulating tax laws.

Under the U.S. tax code, domestic companies must pay tax on total global income, including income generated in other countries. The workaround for companies is to incorporate in those countries.

Earlier, companies chose Caribbean Islands or Switzerland to set up their tax bases, but Britain is becoming increasingly attractive to companies after the country changed its laws to keep profits reported in other countries out of its tax ambit.

Delphi has also been in the news in recent months because it supplied to General Motors Co the defective ignition switches that were linked to at least 13 deaths. [ID:nL2N0Q60MQ]

Delphi’s shares were up about 1 percent at $67.87 in late morning trading on the New York Stock Exchange on Friday.

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