A report to be published this morning by the Government Accountability Office will disclose that the number of companies that list their address in a five-story building in the Cayman Islands nearly doubled to more than 18,500 during the past four years, according to a source who has seen the report.

Roughly half of the companies with addresses at the Ugland House, located in George Town, the capital of the British crown colony, are American.

RELATED: Statements of Senators Baucus, Grassley, and the Witnesses Before the Senate Finance Committee.

The GAO report is the culmination of a yearlong inquiry conducted at the behest of the Senate Finance Committee and comes on the heels of another Senate investigation that said the use of tax havens has cost America an estimated $100 billion a year in lost revenue.

The chairman of the Finance Committee, Senator Baucus, said in commissioning the report from the GAO, which is the investigative arm of Congress, that “this building in the Caymans” is “one of the most likely places shady tax transactions could be sheltered.”

“If American companies are setting up shop at the beach just to avoid their tax obligations, we can’t keep our heads in the sand,” Mr. Baucus said, stressing the need to “make sure honest American taxpayers are not footing the bill for corporations that aren’t paying their fair share.”

The top Republican on the committee, Senator Grassley, said at the time: “We need to strike the right balance between allowing Americans to benefit from the global economy and policing the evasion of U.S. taxes.”

Several economists and tax industry players dispute the $100 billion number and said a surge in the number of companies based in the Cayman Islands does not always correlate with lost taxes. In addition, they point out that America itself is one of the largest tax havens, with more than 850,000 companies registered in Delaware alone, including one Wilmington building where more than 200,000 companies have an address.

“Tax havens don’t necessarily detract from real investment,” a professor at Harvard Business School, Mihir Desai, said. “It can be actually beneficial to tax mobile capital less than immobile capital. Otherwise the mobile capital will just go elsewhere.”

Among the reasons American companies seek offshore tax havens like the Cayman Islands is to reduce their foreign tax liability. For example, an American company with operations in Japan can create an affiliate in the Cayman Islands and structure it so that the affiliate is earning interest, which is tax-deductible in Japan.

This strategy does not reduce American tax revenue, and in fact it can actually boost revenues here by limiting the number of foreign tax credits the federal government hands out to American companies that pay foreign taxes.

“This reduces foreign tax credits, which is actually a benefit,” a professor of economics at the University of Michigan, James Hines, said. “Even without foreign tax credits, this strategy helps America because it makes companies more profitable” and leads to more investments and greater job creation, he said.

Another reason companies invest in a tax haven is to defer American taxation of foreign income. Unlike many other countries, including the European Union, America taxes income earned here and abroad. But if this money is reinvested abroad, the tax is deferred. The lost tax revenue from the deferral of income from American investments abroad totaled $11.9 billion last year and is expected to reach $12.8 billion by the end of this year, according to estimates from the Office of Management and Budget. By 2010, that number will reach $14.6 billion, OMB estimates.

Tax-exempt organizations like pension funds and charities also create affiliates in tax havens to avoid paying taxes on their capital gains and dividends. But in this case, the Internal Revenue Service actually urges this, tax insiders said, through a series of regulations.

“Recognizing this is an unfair tax, the IRS actually provides an exemption so charities and other tax-exempt organizations can avoid it,” a tax partner at the law firm Sadis & Goldberg, Roger Lorence, said.

Hedge funds are one of the largest contributors to the thousands of new companies with addresses in the Cayman Islands. This doesn’t necessarily lead to less tax revenue, because the so-called feeder funds are geared toward tax-exempt and foreign investors who would not be eligible for American taxes regardless.

“Everybody in the hedge fund world knows there has been a huge increase in the number of offshore accounts, but so what?” Mr. Lorence said. “A huge part of this is tax-exempt money and foreign money that wouldn’t be taxed in America anyway.”

To prevent Americans from investing in the Cayman Island affiliates and thereby evading taxes, hedge funds create separate American affiliates to service citizens here, ensuring compliance by requiring investors to fill out a series of detailed questionnaires, industry officials said.

Companies with addresses in Ugland House are clients of the law firm Maples & Calder, which is the building’s sole tenant. The firm declined to comment ahead of today’s hearing, as did the government of the Cayman Islands and a spokesman for the Senate Finance Committee.

“I would imagine that the presence of tax havens may well cost tax revenue, but that does not necessarily mean it is bad to have them around,” Mr. Desai said. “Tax havens can also facilitate investment by allowing investors to reduce their tax burdens.”