Apple's growing cash hoard surges to $256.8 billion
As of the end of the March quarter, Apple held $256.8 billion cash on hand, with the vast majority of it held overseas awaiting possible repatriation tax reform -- if the U.S. government is inclined to cooperate.
Of the $256.8 billion, Apple Chief Financial Officer Luca Maestri noted that $239 billion, or roughly 93 percent, is held in assorted countries overseas. Maestri also noted in the conference call that Apple would re-evaluate the repatriation situation, should the situation change.
Spanning two presidential administrations, Apple has been public about its desire for a repatriation holiday, to lessen the tax burden on cash returned from overseas coffers. President Trump has addressed the need for this in the past, but it is unclear if any reform will pass soon.
At the end of Apple's first fiscal quarter of 2017, Apple held $231 billion in overseas cash, out of its $246 billion total hoard. When asked about the possibility of more lenient tax policies for bringing funds back to America, CEO Tim Cook noted that it would be "very good for the country, and good for Apple" should it come to pass.
Previously, Cook said that Apple was always considering acquisition possibilities, and was "putting their toe in the water" on unique programming for Apple Music and iTunes.
"We've said at 40 percent, we're not going to bring it back until there's a fair rate," Apple CEO Tim Cook said in August 2016. "There's no debate about it. It is the current tax law. It's not a matter of being patriotic or not patriotic."
Apple is the largest taxpayer in the U.S.
Apple on Tuesday revealed it garnered $52.9 billion in revenue and posted year-over-year growth. However, the company once again saw iPhone sales shrink from the same period a year ago.
Of the $256.8 billion, Apple Chief Financial Officer Luca Maestri noted that $239 billion, or roughly 93 percent, is held in assorted countries overseas. Maestri also noted in the conference call that Apple would re-evaluate the repatriation situation, should the situation change.
Spanning two presidential administrations, Apple has been public about its desire for a repatriation holiday, to lessen the tax burden on cash returned from overseas coffers. President Trump has addressed the need for this in the past, but it is unclear if any reform will pass soon.
At the end of Apple's first fiscal quarter of 2017, Apple held $231 billion in overseas cash, out of its $246 billion total hoard. When asked about the possibility of more lenient tax policies for bringing funds back to America, CEO Tim Cook noted that it would be "very good for the country, and good for Apple" should it come to pass.
Previously, Cook said that Apple was always considering acquisition possibilities, and was "putting their toe in the water" on unique programming for Apple Music and iTunes.
"We've said at 40 percent, we're not going to bring it back until there's a fair rate," Apple CEO Tim Cook said in August 2016. "There's no debate about it. It is the current tax law. It's not a matter of being patriotic or not patriotic."
Apple is the largest taxpayer in the U.S.
Apple on Tuesday revealed it garnered $52.9 billion in revenue and posted year-over-year growth. However, the company once again saw iPhone sales shrink from the same period a year ago.
Comments
That's right: you, me, and the rest of the middle and working class.
Open up your wallets, suckers!
USA!
Dont be disingenuous.
You, me and the rest of the middle and working class aren't making up squat. And neither are the rich, who pays most of the taxes. Corporate overseas profit are not taxed in the US, useless they are brought into the US. That is the US tax code. How can the taxes be made up, if it was never there? US tax money from corporate overseas profits is an illusion by those that don't understand the US tax codes. It doesn't exist and never will, until the US tax code changes or the corporations brings those overseas profit into the US.
Something that would leave the winners with something special and the opportunity to choose where Apple should donate a small chunk of its fortune. For example, areas of health, science, social initiatives etc.
But people that defer paying taxes on the money they put away in a tax deferred TSP, IRA or 401K do get a "tax holiday". More often than not, when they withdraw the money from their tax deferred retirement account, they will be paying less in taxes on that money, than the taxes that was due at the time they deposited the money. That's because when one retires, they are often in a lower marginal tax bracket. Thus what might have been a tax rate of 25%, 28% or 33% on that earned income at the time of the taxed deferred deposit, could end up only being taxed at a rate of 15% or 20% at the time of withdrawal. That is a "tax holiday". If one didn't get that "tax holiday" and had to pay the same tax rate at withdrawal, as when the money was earned, what's the point putting money into a taxed deferred IRA retirement account? Not everyone have access to a retirement account, with some sort of matching funds from an employer.
I case you're not familiar with how a publicly traded corporation works, that fortune belongs to all the AAPL shareholders. Apple first duty is to its shareholders and that money should first be spent on things that benefits AAPL shareholders.
Gates, Buffet and Zuckerberg are giving away their own personal fortune to health, science social initiatives, etc., they are not donating a small chunk of Microsoft or Berkshire Hathaway or Facebook fortune.
I'm not American, however I do live in a country where money set aside for retirement is also treated favourably by tax code so I get what your saying. But it's a false equivalence, comparing a retiree's tax planning with a corporation holding money offshore.
In the US, the Feds treat tax deferred money set aside for retirement as regular income when it is withdrawn at retirement. The only favorable tax treatment is that it is taxed at the retiree's current marginal tax bracket. But if the retiree is in the same or higher marginal tax bracket as when he/she deposited the money, there will be no favorable tax treatment, by the Feds, on that money set aside for retirement. In fact, if one didn't make enough money to owe taxes for several years or was in the 10% marginal tax bracket for many years, but still managed to put money into a taxed deferred IRA, when that money is withdrawn during retirement, one might have to pay more taxes on it than when it was deposited. In the US, the Feds tax all retirement pensions, up to 80% of Social Security benefits and all withdrawal from any tax deferred retirement accounts as regular income. State tax codes are different by States. In some States, SS is not taxed at all but pensions are. There are States that don't tax money withdrawal from retirement accounts. There are States with no State tax at all. In the US, a retiree's tax planing consist of planning to pay taxes until the day they die, and maybe even then after.
And of course there are ways for corporation to reduce the US tax liability of overseas profits. If a corporation have a loss of $5B in the US one year, then they can bring enough overseas profit to offset the loss and end up not having to pay any taxes on it. If a corporation incurs a tax credit in the US, then it can bring in overseas profits and use the tax credit to pay the tax liability on the overseas profits brought in. Corporation could also take on debt based on the cash they have overseas. Use the debt to buy back shares or pay dividends. And then deduct the interest on the debt from the tax liability. Corporation could also spend the profit overseas and not have to pay any US tax liability at all, on those profits. Just because the US don't tax corporation's overseas profits doesn't mean that corporations are just sitting on their overseas profits, while waiting for a tax break to bring it into the US, before they will put it to good use.
So yes there's a chunk for which Apple has no plans to ever pay US taxes on whether tax reform happens or not.
Your affirmation is not correct in this case. Please do a quick search on the donations made by publicly listed companies.
Please cite your references -- where has Apple pretended their don't owe anyone anything? After all, they're already the largest US taxpayer, even while other companies (cough GE) famously scammed their way to paying $0, and worse, being owed a refund.
When it comes to business that Apple does in the United States, it pays an extraordinary amount of income tax. Apple has paid (not counting the deferred taxes it accounts for in its reporting) over $30 billion in U.S. income taxes over the last 3 fiscal years. That's nearly $100 for each man, woman, and child living in the United States. So using your static notion for the total amount of income taxes that need to (or should) be paid, we each get to pay (more than) $30 less per year in income taxes because of the huge amount that Apple pays. (That's of course not how it actually works, I'm working off of your notion of things.)
That's not including all of the other tax revenue that Apple helps to create: Income tax on its employees' compensation, income tax on other businesses which supply products or services to Apple, income taxes on other businesses which Apple has facilitated, sales tax. And, of course, Apple's owners have to pay another round of taxes when they actually get the profits which Apple creates (and which have already been taxed). Apple has created more than $800 billion in wealth (some still 'on paper') over the last 40 years. Much of that hasn't been realized as income by Apple's owners yet, but much of it has. But when it is realized in the U.S., which much of it is, typically it gets taxed.
When it comes to foreign nations, there may be reasonable arguments to be made that Apple hasn't been paying its fair share of taxes (I'd likely disagree with those arguments, but they might be made). But when it comes to the domestic situation, I don't see where there's a reasonable argument to be made that Apple hasn't been paying its fair share of U.S. taxes.
Apple books a profit of roughly $1B US every single week (not including undistributed earnings which is another story). In three years that's 150 weeks plus. In those 150 weeks plus Apple paid around around 30 weeks worth in taxes.
So Apple would claim they paid an effective tax-rate of 26% and a smidgeon. Well, not actually paid from a cash standpoint.
"On a cash basis, it has spent about 18 percent of its pre-tax profit on taxes in the last three financial years. The rest of the expenses the company accounted for swelled the tax liability on its balance sheet. When its 2015 financial year ended, the company had a net deferred liability of $16.2 billion sitting on its books."
And that DOES NOT include the approx. $32B Apple estimates it would owe on their undistributed foreign earnings if they had paid at the 12.5% statutory rate that Irish law provides for. In 2014 alone their foreign earnings (profits in essence) amounted to nearly $34B US. That's accounts for the vast majority of Apple's net foreign profits in all of Europe, Latin America, Asia and South America that year which for the most part flowed entirely thru those Irish subsidiaries even if the sales themselves weren't physically made in Ireland or even Europe for that matter.
Last year they booked another $41B+ in undistributed earnings, profits for which Apple has no repatriation plans under any foreseeable circumstances. I've not seen Apple's estimate of taxes if they were required to pay corporate taxes on last year's foreign earnings at the already low 12.5% irish rate, much less than if they had paid in the countries where the sales had physically occurred.
And don't think Apple is the Lone Ranger when it comes to creative tax avoidance. Google. Amazon, Facebook, GE, big Pharma etc all play that game. The chickens are coming home to roost for Facebook already with an IRS investigation, and Google is likely close behind. Apple isn't singled out.
For those 3 years Apple made over $187 billion in global pre-tax profit. But relevant to the point I was making, if we look at the profit Apple made which is attributable to its U.S. sales and add that to Apple's net investment income (all of it), we get around $65 billion. We can't nail that last number down, that's a ballpark. It could perhaps be considered to be $70 billion.
Now, as accounting rules work, more profit than that is actually attributed to the United States. So Apple pays U.S. income taxes (on a cash basis, not just on a deferred basis) on a (somewhat) higher base than that $65 billion. But those numbers give us an idea of how much income tax Apple pays in the U.S. relative to how much business it does here: $31 billion in income taxes, $65 billion-ish in profit.
Beyond that, for the most part, we're talking about extraterritorial taxation. It is that which I'm suggesting is not only wrong in a general sense but also net-economically-harmful.
So... I think you've misunderstood some of what Apple reports in its SEC filings. Apple hasn't estimated that it would owe $32 billion on undistributed foreign earnings if it paid Ireland's 12.5% rate on those undistributed foreign earnings. What Apple has estimated is that it has (as of the end of FY 2016) $36 billion in unrecognized deferred U.S. tax liability based on the $110 billion in undistributed foreign earnings which it plans to indefinitely reinvest outside of the United States. That $36 billion would be based on the U.S. federal tax rate of 35% and would account for the deduction of the small amount ($2-3 billion) which Apple has paid to Ireland on those particular undistributed earnings.
Apple basically has 2 pools of undistributed foreign earnings: One (that was about $106 billion as of the end of FY 2016) for which it has accounted for deferred U.S. income taxes and a second (that's the $110 billion I just referred to) for which it hasn't accounted for deferred U.S. income taxes.
Also, the $41 billion you refer to is not undistributed earnings which Apple has no repatriation plans for. That is Apple's total pre-tax foreign earnings for FY 2016. After paying (a small amount) of foreign taxes on it, around $10 billion of it was distributed (i.e. returned to the parent company, repatriated as many describe it). Of the remaining, around $17 billion went (so to speak) into that second pool - i.e., deferred U.S. income taxes weren't accounted for as Apple intends to indefinitely reinvest it outside of the United States. The remaining around $12 billion went into that first pool - i.e., deferred U.S. income taxes were accounted for as Apple doesn't intend to indefinitely reinvest it outside the United States.