Guess who's pushing for tax holiday?
Guess who's pushing for tax holiday
By: David Saleh Rauf
April 5, 2012 11:36 PM EDT
Overseas cash and earnings stockpiles for 12 of the United States’ biggest businesses — from Microsoft to Merck — grew by about 20 percent in 2011, as most of them lobbied hard in Washington for a “tax holiday” to bring that money home at a steep discount.
A POLITICO review of annual reports and Securities and Exchange Commission filings shows that a dozen of the most vocal corporate critics of U.S. tax policy finished 2011 with more than $455 billion in cash, investments and other earnings held by foreign subsidiaries — up from $381 billion the year earlier.
The companies have avoided U.S. taxes on almost every penny of their international profits by keeping the money offshore. And nearly that entire haul has been designated by top executives of those firms as “permanently” or “indefinitely” reinvested abroad, partly because of the 35 percent U.S. tax rate companies must pay to bring home foreign money.
That $455.6 billion, along with hundreds of billions more dollars in other earnings parked overseas, lies at the center of a tug of war between lobbyists, Congress and the White House over how to tax international profits.
U.S. multinationals have hired an army of lobbyists to sell the idea of a tax holiday to Congress, so they might repatriate a pot of overseas profits estimated at more than $1 trillion for as low as a 5.25 percent rate. The companies — along with the U.S. Chamber of Commerce — argue that repatriation would serve as an instant stimulus of sorts, allowing hundreds of billions of dollars to flow in to the economy.
Critics disagree. They say the proposal is bad tax policy.
As evidence, the critics point to a 2004-05 tax holiday that brought some $312 billion back into the U.S. Most of that was spent on dividends and stock repurchases — not building or hiring.
President Barack Obama is caught in the middle of the fight. He’s not a repatriation fan, but some of his biggest corporate boosters in Silicon Valley and elsewhere are. The tax reform blueprint the administration rolled out in February shunned repatriation, and even proposed to end the system that allows multinationals to defer U.S. income taxes on foreign earnings until they’re repatriated.
Obama, however, is open to the idea of repatriation as an ingredient in a larger recipe for overhauling the corporate tax code.
Meanwhile, the largest U.S.-based firms are steadily adding to their cash and earnings stashed overseas. (Note: Some firms report cash and liquid investment totals held by foreign subsidiaries; others list foreign earnings, or undistributed earnings, which include a mix of overseas cash, investments and other assets that have not been taxed at the U.S. 35 percent corporate rate).
Here are the companies and the links to their SEC filings:
Apple — currently sitting on a $97.6 billion war chest — shined a spotlight on the repatriation issue last month when it announced plans to use $45 billion for a stock buyback and dividend program. None of that is coming from foreign cash because of the 35 percent tax hit. The company’s overseas cash stockpile increased by $28.9 billion in 2011.
As of Dec. 31, 2011: $64 billion
As of Dec. 25, 2010: $35.1 billion
General Electric: 1.usa.gov/GXUIhx
GE Chief Executive Officer Jeffrey Immelt is chairman of Obama’s jobs council but is at odds with the president on the issue of repatriation. In a recent interview with “60 Minutes,” Immelt conceded the 2005 tax holiday failed to create a hiring spree among corporations that took advantage of repatriation. But, he said,“it can’t intellectually be any good to anybody to have $1.2 trillion outside the U.S.” The company’s overseas earnings grew by $8 billion in 2011.
As of Dec. 31, 2011: $102 billion
As of Dec. 31, 2010: $94 billion
Microsoft reports that almost 90 percent of its $51.7 billion in cash and liquid investments is held by foreign subsidiaries. The company repatriated $780 million during the 2005 tax holiday, according to a report from the Senate Permanent Subcommittee on Investigations.
Microsoft increased its foreign profit by $4 billion between March and December of last year.
Foreign cash/short-term investments:
As of Dec. 31, 2011: $46 billion
As of March 31, 2011 (oldest report listing overseas cash): $42 billion
IBM broke rank with U.S. multinationals last year when it made clear that repatriation distracts from the larger issue: revamping the corporate tax code. IBM officials have described repatriation as a “one-time remedy.” Still, Big Blue repatriated $9.5 billion during the most recent tax holiday — the fifth-highest amount among all U.S. multinationals. The company reported growing “undistributed foreign earnings” by $6.8 billion in 2011.
“Undistributed” foreign earnings:
As of Dec. 31, 2011: $37.9 billion
As of Dec. 31, 2010: $31.1 billion
The pharma giant repatriated almost $16 billion during the 2005 tax holiday, then announced plans to eliminate 7,000 jobs worldwide over the following three years, with about half coming from the U.S. The company, in its annual report, notes that worldwide cash and investment currently total $18.5 billion, with a “substantial majority of the cash and investments held by foreign subsidiaries.” The company’s foreign earnings grew by $3.9 billion in 2011.
As of Dec. 31, 2011: $44.3 billion
As of Dec. 31, 2010:$40.4 billion
The search giant is one of the marquee companies behind the WIN America Campaign, which represents corporations lobbying for the tax holiday. Google has amassed $44.6 billion, with almost a n 50-50 split between domestic and foreign. The company notes in its filings that the “intent is to permanently reinvest” foreign earnings “outside of the U.S.” In 2011, Google increased its foreign pot by $4.5 billion.
As of Dec. 31, 2011: $21.2 billion
As of Dec. 31, 2010: $16.7 billion
Cisco CEO John Chambers has been one of the most vocal proponents in the tech world for repatriation. He keeps roughly 90 percent of the company’s $46.7 billion overseas. And Chambers pledged during a November interview with Bloomberg TV to return the profit parked overseas and to “invest in America” if Congress passes a tax holiday. Cisco’s overseas cash grew by $4.6 billion.
As of Jan. 28, 2012: $41.7 billion
As of Jan. 29, 2011: $37.1 billion
Johnson & Johnson: 1.usa.gov/Ha4jyV
Johnson & Johnson repatriated the fourth most of any U.S. multinational during the 2005 tax holiday, bringing home close to $11 billion at a steep tax discount, according to the Senate study. The company’s foreign subsidiaries currently hold a total of $24.5 billion in cash, according to an SEC filing. The company’s overseas earnings increased by $4.6 billion.
“Undistributed” foreign earnings:
As of Jan. 1, 2012: $41.6 billion
As of Jan 2, 2011: $37 billion
Two-thirds of Oracle’s $29.7 billion is overseas. The company says in SEC filings that a “significant portion” of that has been deemed as “indefinitely reinvested earnings outside the United States.” Oracle repatriated about $3 billion during the 2005 tax holiday and increased its foreign profit by $3.2 billion in 2011.
As of Feb. 29, 2012: $25.1 billion
As of Feb. 28, 2011: $21.9 billion
Duke Energy: 1.usa.gov/HajZFY
Duke Energy CEO Jim Rogers, in a Roll Call op-ed last year, said his company’s foreign earnings were being “held hostage overseas by a tax system that penalizes U.S. businesses that want to bring their foreign earnings to America to create jobs.” At the time, Duke Energy had $1.2 billion in foreign earnings it pledged it would not bring home without congressional action to address the 35 percent tax rate on foreign profits. That’s grown by $500 million over the past year.
“Undistributed” foreign earnings:
As of Dec. 31, 2011: $1.7 billion
As of Dec. 31, 2011: $1.2 billion
Intel CEO Paul Otellini is a member of Obama’s jobs council but also is one of the heads of a U.S. multinational pushing for a territorial tax system that the administration rejected in its blueprint. The chipmaker repatriated close to $6.2 billion in 2005. Its pot of “undistributed earnings” held by foreign subsidiaries increased by $2.4 billion in 2011.
“Undistributed” foreign earnings:
As of Dec. 31, 2011: $14.2 billion
As of Dec. 31, 2010: $11.8 billion
Qualcomm CEO Paul Jacobs signed on to a November letter, along with the chiefs of several other prominent tech firms, urging Washington’s most powerful politicians to pass a repatriation holiday or watch as the companies spend hundreds of billions of dollars overseas. More than 70 percent of the company’s $22 billion in cash and securities is currently held overseas. Qualcomm’s overseas pot of cash grew by $2.9 billion.
As of Dec. 25, 2011: $15.9 billion ($14.5 billion is considered “indefinitely” reinvested abroad.)
The money is overseas predominantly because that is where it is earned.
Why? less regulation, less taxation.
I guess that money failed to "trickle down".......
These corporations employ MUCH America and you "Bastardize" them.
Why should they bring the money here? So they can support the millions of people able to work but won't or the public employee union members who have excellent pay and benefits that are 3 times greater than their own employees?
the average fortune 500 company employee , when he leaves after 30 years has a pension of perhaps $2,300 a month PLUS their 401K plan (I see it everyday). Some health coverage but not much. NOW they ONLY have 401K plans. You want them to pay for lifetime benefits of workers who work basically only 25 years?
Please. You are a smart guy but have NOT yet looked at why people dont want to pay tax if they can avoid it.
Since I owned a few of those companies' stocks, it trickled down to me in the form of dividends. I reinvested all of my dividends at that time. Future growth. Most of my investments were in bonds - corporate and municipal which do generate jobs.
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