As Apple's offshore cash pile reaches $190B, US Congress moves closer to multinational tax reform

Posted:
in AAPL Investors edited July 2015
Apple, Google, and other major U.S.-based multinationals may soon be able to bring more of their foreign-earned income back to American shores without facing a huge tax burden, as lawmakers are moving forward on a tax reform framework that could eliminate taxes on international earnings and authorize a one-time repatriation holiday.

Cork
Apple's European headquarters in Cork, Ireland, via Flickr user Sigalakos.


Congressional leaders on both sides of the aisle and the White House are now on the same page when it comes to corporate tax reform, according to The Wall Street Journal. The revamp --?which might also include new tax rules for intellectual property --?would in part raise money to fund an expansive highway infrastructure investments program.

"Everyone is largely in agreement on the building blocks of a deal," Rep. John Delaney told the publication. The sentiment in Congress is to "get the framework set, so then we can arm wrestle on the numbers," he added.

For now, the U.S. is the only developed country that imposes taxes on the worldwide income of its citizens and corporations.

In addition to the broader tax code rewrite, both parties have reportedly agreed that it would be beneficial to offer a one-time repatriation tax holiday that would allow multinationals to bring their current foreign cash back to the U.S. at a steeply discounted tax rate. Without such an opportunity, most companies --?including Apple --?choose to fund expensive U.S.-based projects with debt, as even long-term debt service is substantially cheaper than paying high U.S. taxes on money that has already been taxed once overseas.

Apple has been a vocal proponent of corporate tax reform, with chief executive Tim Cook appearing before Congress to testify about his company's practices vis-a-vis its overseas operations.

"It would be very expensive to bring that cash back to the United States," Cook said in 2013 when asked why Apple keeps so much money overseas. "Unfortunately, the tax code has not kept up with the digital age."

During its third-quarter earnings call on Tuesday, Apple revealed that its cash hoard has now passed $200 billion, with $190 billion of that sum held offshore.
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Comments

  • Reply 1 of 114
    anantksundaramanantksundaram Posts: 18,956member
    Inevitable, and about time.

    Can't believe it's been taking so long.
  • Reply 2 of 114
    robmrobm Posts: 1,068member
    Yea - I wonder why the U.S. Government has kept this draconian policy in place and for so long.

    Makes little sense and should have been redressed years ago.
    The mention of a new tax policy concerning IP is interesting - would like to know what they're planning there.
  • Reply 3 of 114
    Let's do this!
  • Reply 4 of 114
    Quote:

    Originally Posted by AppleInsider View Post



    In addition to the broader tax code rewrite, both parties have reportedly agreed that it would be beneficial to offer a one-time repatriation tax holiday that would allow multinationals to bring their current foreign cash back to the U.S. at a steeply discounted tax rate. 

     

    Our government should not be offering "one-time tax holidays" every so often but should be changing our tax code to encourage businesses to bring back their offshore holdings back anytime they see fit.

  • Reply 5 of 114
    carthusiacarthusia Posts: 561member

    Great idea....and not to get into political flame war, but much of that money could go to crumbling schools and not just crumbling roads. 

  • Reply 6 of 114
    Quote:

    Originally Posted by sog35 View Post

     

     

    need to walk before you run




    True, but if we didn't have such short sited rules in our tax code (or a lot of our laws) it would allow are government to get more things done without having to waste the time of renewing things every 12 months. I am not saying we should have timelines for the next 20-50-100 years but longer then a year.

     

    Our government would have loads more time to get new things done, or loads more time to do nothing depending on your view of politicians work ethic.

  • Reply 7 of 114
    chasmchasm Posts: 1,152member
    The story has welcome news but is remarkably light on actual details. A summary of exactly what changes are contemplated (beyond a vague "probably a tax holiday at some point, though how much of a discount we don't bother to mention") and what longer-term changes are planned would certainly be nice, for starters.

    Though not really germane to Apple, I'd love to see the US change its thinking about expat taxation. You should be taxed the normal tax rate of the country you reside in only; where you earned the money should not be relevant. The entire rest of the world, except the US, follows this simple rule.
  • Reply 8 of 114
    Quote:

    Originally Posted by Carthusia View Post

     

    Great idea....and not to get into political flame war, but much of that money could go to crumbling schools and not just crumbling roads. 


     

    Everyone knows in our country that prisons are way more important then the education of our children or the maintenance of our critical infrastructure.

     

    Quote:

    Originally Posted by sog35 View Post

     

     

    at this point I'd take any tax holiday


     

    True, a tax holiday is better then nothing but it is ridiculous that it has been 12 yrs since the last one.

  • Reply 9 of 114
    mdriftmeyermdriftmeyer Posts: 7,213member
    sog35 wrote: »
    schools should be done remotely.  No reason to fund expensive buildings and playgrounds.  

    The model of going to school and having billion dollar buildings is obsolete. 

    Live on another planet and experiment with such a stupid idea. Half of education is the social growth of children in large schools.
  • Reply 10 of 114

    But doesn't Apple now owe lots of money too? All the bonds they issued in order to fund dividends (because they couldn't access the offshore cash). So their "cash pile"  is really 200B - debt, which I believe is about 43B at the moment. Or am I missing something?

  • Reply 11 of 114
    Still find it shocking that our Government has a corporate tax policy that encourages income made outside the US to stay outside the US and be reinvested somewhere other than the US. Strangely this tax policy was initially enacted during the Reagan administration. All the great empires of history from Alexander's Macedonians, to the Romans, to the British wanted every bit of money made outside to be brought back and used in the homeland. The US policy has this all wrong.
  • Reply 12 of 114
    e1618978e1618978 Posts: 6,073member
    Quote:
    Originally Posted by MattBookAir View Post

     

    But doesn't Apple now owe lots of money too? All the bonds they issued in order to fund dividends (because they couldn't access the offshore cash). So their "cash pile"  is really 200B - debt, which I believe is about 43B at the moment. Or am I missing something?


     

    $125B net of debt

  • Reply 13 of 114
    [B]Bad laws for individuals as well[/B] If, as an American citizen, you have lived and worked outside the US, you know you have to pay the taxes of the country where you earned money AND pay taxes to Uncle Sam. This double taxation is unfair to Americans.
  • Reply 14 of 114
    jungmarkjungmark Posts: 6,647member
    Our government should not be offering "one-time tax holidays" every so often but should be changing our tax code to encourage businesses to bring back their offshore holdings back anytime they see fit.

    Agreed. And what would the rate be on this tax holiday ?
  • Reply 15 of 114
    iobserveiobserve Posts: 93member
    sog35 wrote: »
    show me research that dealing with kids at large schools benefits children.  No one is saying they can't have outings at museums, zoos, ect.  But its an absolute waste of money to spend billions on classrooms when most children have perfectly good computers at home.

    Lets say 4 times a week they do remote learning.  And once a week they have an outing to socialize with other kids.  And kids have the rest of the day to socialize with neighbors anyway.  And without having to commute they will have more time to do so.

    Having brick and mortar schools are a waste:

    1. Billion dollar buildings
    2. Billion dollar debt and interest payments to pay for those schools
    3. Expensive school buses, security, and causing tons of traffic.
    4.  Expensive maintenance of the property, insurance, ect

    Every other industry is going remote.  Why not schools?  

    Another added benefit is you can monitor bullying better since everything will be recorded by webcam.

    You can learn almost anything remotely now.  Colleges and unviersities have been doing this for decades.  

    You really are delusional and have no idea how education, society, and socialization work.
  • Reply 16 of 114
    anantksundaramanantksundaram Posts: 18,956member
    sog35 wrote: »

    Second Apple has over $25 billion of accrued taxes on the books.  If this law passes that liability disappears.  Unlike other companies like Google, Apple expenses taxes they have not and may never have to pay.  Thus that $25 billion will be recorded as INCOME when the tax law changes.

    This is a great observation, and quite plausible (unless Congress tweaks the change in law on the argument that it's a 'loophole' and accrued taxes will have to be paid).
  • Reply 17 of 114
    jungmark wrote: »
    Agreed. And what would the rate be on this tax holiday ?

    It should be 0 as many other developed countries have but from what I read around 6% is what current negotiations are at
  • Reply 18 of 114
    fallenjtfallenjt Posts: 3,971member
    Quote:

    Originally Posted by sog35 View Post

     

    This will be a BONANZA if this law passes.

     

    First Apple and shareholders will get access to the $200 Billion.  If that happens I expect a massive one time special dividend, increase in regular dividend, and massive increase in buyback program.

     

    Second Apple has over $25 billion of accrued taxes on the books.  If this law passes that liability disappears.  Unlike other companies like Google, Apple expenses taxes they have not and may never have to pay.  Thus that $25 billion will be recorded as INCOME when the tax law changes.  This will also change Apple tax accrual going forward.  Right now their tax rate is about 26%.  If this law passes it could dip to 20%.


    Barbara Boxer and Rand Paul proposed 6.5% one time to bring cash home but Obama rejected. Now, if Rand Paul wins the presidency, we may see this happening. 

  • Reply 19 of 114
    anantksundaramanantksundaram Posts: 18,956member
    sog35 wrote: »

    So now Apple paid 20% Japanese tax, 35% US Tax, and 5% State tax.  That is 60% taxes!!

    This is not correct. In your example, the incremental federal tax owed will be 15% (35% minus the 20% paid in Japan), not all 35%.
  • Reply 20 of 114
    anantksundaramanantksundaram Posts: 18,956member
    e1618978 wrote: »

    $125B net of debt
    <img alt="" src="http://images.apple.com/pr/library/2015/07/q3fy15_02.jpg" style="width:700px;">

    Where the heck are you getting that number? Apple's TOTAL debt is 4.5 commercial paper + 2.5 current portion of LTD + ~47 LTD = $54B. It's cash is ~$204B. Net debt is a negative number, –$150B
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