Apple could gain the most if U.S. agrees to one-time cash repatriation holiday

Summary:Senators on both sides of the aisle are trying to drum up funds for a federal transportation project by floating the idea of a offshore profit repatriation holiday for major American businesses.

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Apple could be set to gain if a U.S. bipartisan effort to give American companies a tax break holiday in order to repatriate offshore cash and profits goes ahead.

Leading U.S. senators on both sides of the political spectrum believe the proposal could generate enough revenue to fund vital federal projects — not least in the Federal Highway Trust Fund, which is set to run out of funds by the end of August.

According to Reuters, the plan would allow major U.S. companies to take advantage of a one-time reduction in the taxes they would pay on foreign profits, giving them an incentive to bring offshore profits back into the U.S.

But according to Sen. Ron Wyden (D-OR), the chairman of the Senate Finance Committee, "Nothing has been agreed to. Nothing has been ruled out."

It comes just a few weeks after eBay announced it would repatriate some of its foreign earnings back into the U.S., taking a $3 billion non-cash tax charge in the first quarter as a result, in order to help the federal government on much-needed projects.

That hit, however, was taken without a single tax break offered by the federal government, Wyden added. 

Apple previously said it would not repatriate its estimated $132 billion (or 88 percent) off-shore cash reserve — according to its fiscal second-quarter earnings — citing higher taxes and the subsequent detriment to the company's shareholders.

But the politicians on the Hill have to start weighing up Apple's position, considering it remains the U.S. Treasury's largest corporate taxpayer, paying about $1 in every $40 collected by the federal tax office.

Currently, non-U.S. profits that are held overseas do not face the 35 percent corporate income tax until they are brought back onto U.S. soil. And until such a tax break is introduced, American companies can store their offshore profits indefinitely, which can be helpful particularly for investing back in their local businesses and markets where that cash resides.

But for Apple chief executive Tim Cook, who said in testimony to Congress last year, bringing that cash back to the U.S. would cause the company to lose one-third of its cash reserve. At the time, more than 60 percent of Apple's revenue came from international sales .

The last time a repatriation holiday was enacted in 2004, the tax rate was temporarily lowered to 5.25 percent.

(via Reuters)

Topics: Apple

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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