Apple wins $920K tax refund from 1989, loses appeal for overseas tax reprieve

Posted:
in General Discussion edited January 2014
California's Supreme Court has affirmed a $920,000 tax refund for Apple dating back to 1989, but it refused to hear the company's request to lower its tax bill for income earned abroad.



The court upheld an appellate ruling earlier this week that returned $231,000 in taxes to Apple, along with $689,000 in interest, The San Francisco Chronicle reports. The Franchise Tax Board was ordered to return the money because Apple should have been allowed to deduct interest from loans for its U.S. operations



However, the final ruling came as only a partial win, as the Supreme Court rejected Apple's request to reevaluate tax rates on foreign-earned income. After California reduced taxes on overseas income in 1989, the Cupertino, Calif., company sought to reclassify the status of income it received as dividends from its foreign holdings.



"Apple argued that its foreign dividends from that year should be attributed to income from previous years that had already been taxed," the report read.



But the appeals court sided with the tax board's assertion that companies should be taxed on foreign dividends from income generated that year.



Apple's lawyer warned the decision could have expensive ramifications in the future. "It creates some potential issues for companies that want to repatriate earnings from overseas," Jeffrey Vesely told the publication on Thursday.



According to the report, two organizations, the California Taxpayers Association and the Council on State Taxation in Washington, D.C., backed Apple in petitioning the state Supreme Court to hear the case.



The issue of overseas earnings has reached "heightened importance during our current economic climate, as it affects the ability of United States companies to bring billions of dollars of foreign earnings back into the United States economy," the California Taxpayers Association told the court.



Deputy Attorney General Kristian Whitten, speaking for the Franchise Tax Board, argued that Apple was "attempting to avoid, or at least indefinitely defer, the payment of tax on its remaining foreign-source income."



As the portion of Apple's income that it earns outside of the U.S. has surpassed its domestic earnings, the company has taken to lobbying for a tax holiday that would allow it to repatriate its cash with a reduced tax load. A consortium of companies, which includes Apple, has proposed a one-year break that would let companies pay just 5 percent to bring their money home, rather than the 35 percent tax rate they currently face.



Two-thirds of Apple's cash hoard, which reached $81 billion in the September 2010 quarter, is located offshore. The company's participation in the WIN America group fighting for the tax holiday has drawn the ire of a group opposing the proposed tax cuts. US Uncut staged several protests outside of Apple retail stores last year.



Protest outside Chicago Lincoln Park Apple Store
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Comments

  • Reply 1 of 69
    I'm surprised that I haven't heard Canada make an offer to accept tax-free investment in their country. Usually they jump at these opportunities. There is probably some office space available in Waterloo.
  • Reply 2 of 69
    asciiascii Posts: 5,941member
    Lol, $689,000 in interest. Serves the government right for being so slow.
  • Reply 3 of 69
    solipsismxsolipsismx Posts: 19,566member
    I'm confused by the phrase "anti-lobbying group opposing the proposed tax cuts." Aren't they themselves lobbying, but for the opposite outcome. Are they against lobbying or just against corporate tax cuts for offshore profits?
  • Reply 4 of 69
    Quote:
    Originally Posted by SolipsismX View Post


    I'm confused by the phrase "anti-lobbying group opposing the proposed tax cuts." Aren't they themselves lobbying, but for the opposite outcome. Are they against lobbying or just against corporate tax cuts for offshore profits?



    It's possible they have no idea what they're even protesting or what the ramifications of their "dream" might actually entail.
  • Reply 5 of 69
    Quote:
    Originally Posted by SolipsismX View Post


    I'm confused by the phrase "anti-lobbying group opposing the proposed tax cuts." Aren't they themselves lobbying, but for the opposite outcome. Are they against lobbying or just against corporate tax cuts for offshore profits?



    Hrmm, yeah I guess that isn't very clear.



    They're against companies lobbying for the corporate tax cuts and they're against the cuts.



    Their demands for Apple: "Leave the Tax Cheat Lobbying Group and Stop Lobbying Congress for More Tax Loopholes"



    It doesn't look like they themselves lobby the government (in the formal sense) since they consider themselves a grassroots movement.
  • Reply 6 of 69
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by joshong View Post


    ...they consider themselves a grassroots movement.



    Translation: All four of us meet on the 3rd Tuesday at the Y... and Debbie brings pie.
  • Reply 7 of 69
    Quote:
    Originally Posted by SolipsismX View Post


    I'm confused by the phrase "anti-lobbying group opposing the proposed tax cuts." Aren't they themselves lobbying, but for the opposite outcome. Are they against lobbying or just against corporate tax cuts for offshore profits?



    That's a damn good point. They are protesting this tax cut, not protesting lobbying. What a bad caption.
  • Reply 8 of 69
    kibitzerkibitzer Posts: 1,113member
    Whoopee. $980K. These days Apple truncates the dollar amounts in its financial statements to the millions.
  • Reply 9 of 69
    davendaven Posts: 525member
    "A consortium of companies, which includes Apple, has proposed a one-year break that would let companies pay just 5 percent to bring their money home, rather than the 35 percent tax rate they currently face."



    I'm an Apple stockholder but I don't think that is fair. I'm not requesting a one time annual tax rate of 5% so I can cash out my 401k with virtually no tax.
  • Reply 10 of 69
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by DaveN View Post


    "A consortium of companies, which includes Apple, has proposed a one-year break that would let companies pay just 5 percent to bring their money home, rather than the 35 percent tax rate they currently face."



    I'm an Apple stockholder but I don't think that is fair. I'm not requesting a one time annual tax rate of 5% so I can cash out my 401k with virtually no tax.



    But we're talking overseas profits. Profits that were not made in the US. Profits that will not come back to the US and therefore won't be used in the US so long as there is a 35% tax rate on them. Some US companies may have no choice because they don't make enough profit in the US to stay above water but Apple is not one of them. So what is better: getting 5% of tens of billions or 35% of nothing? As a US citizen I'm all for funneling more money back to this country.
  • Reply 11 of 69
    asciiascii Posts: 5,941member
    The primary job of any government is to maintain law and order in a given geographical area, and that is the main reason they receive taxes. Therefore taxes should go to the government in the area you earned the money. US companies operating overseas should pay taxes to the local government not the US government.
  • Reply 12 of 69
    blursdblursd Posts: 123member
    Now that's government efficiency in action ... an issue from 1989 resolved in 2012.



    And people want to give them control over healthcare too ... name me one entitlement program or agency the government runs in an efficient and/or in a sustainable fashion.
  • Reply 13 of 69
    Quote:
    Originally Posted by SolipsismX View Post


    But we're talking overseas profits. Profits that were not made in the US. Profits that will not come back to the US and therefore won't be used in the US so long as there is a 35% tax rate on them. Some US companies may have no choice because they don't make enough profit in the US to stay above water but Apple is not one of them. So what is better: getting 5% of tens of billions or 35% of nothing? As a US citizen I'm all for funneling more money back to this country.



    However Apple, like many other companies including Google and Microsoft, use the Double Irish tax loophole that assures them they pay virtually no taxes on those overseas profits either. They can't have it both ways; you either pay taxes in the US or you pay them overseas.



    http://en.wikipedia.org/wiki/Double_Irish_Arrangement

    http://news.cnet.com/8301-30684_3-20020329-265.html



    I'm with California here. Either Apple agrees to pay the tax rates owed, or they keep the money overseas.



    Besides, such a tax holidays was granted once before. Instead of "spurring the economy" here in the US, as proponents of the holiday will say, companies used the savings to buy back stock and give their CEO bonuses instead of hiring new people or investing in R&D. In fact after a $150 BILLION dollar tax break, the top 15 companies actually laid people off.



    http://www.businessweek.com/news/201...et-repeat.html



    In an economy where everybody seems worried about where every penny is spent, how about we start looking at where the pennies are getting lost in the system instead of trying to give a $300 billion tax break to companies.
  • Reply 14 of 69
    entropysentropys Posts: 1,698member
    Quote:
    Originally Posted by ascii View Post


    The primary job of any government is to maintain law and order in a given geographical area, and that is the main reason they receive taxes. Therefore taxes should go to the government in the area you earned the money. US companies operating overseas should pay taxes to the local government not the US government.



    Quote:
    Originally Posted by SolipsismX View Post


    But we're talking overseas profits. Profits that were not made in the US. Profits that will not come back to the US and therefore won't be used in the US so long as there is a 35% tax rate on them. Some US companies may have no choice because they don't make enough profit in the US to stay above water but Apple is not one of them. So what is better: getting 5% of tens of billions or 35% of nothing? As a US citizen I'm all for funneling more money back to this country.



    Yep, this tax law is bizarre. Apple earns $xxmillion in Australia, pays its corporate taxes according to Australian tax law, but then can't take the money home without paying tax, all over again, just because they hit the button for electronic funds transfer.



    I'm surprised they were still willing to pay 5%.



    Speaking as an Australian, this is great. It means that Apple is more likely to use this money for investment over here, rather than those profits head back to the USA. Meanwhile, you mob get none of it, and keep right on borrowing like no tomorrow.



    I feel sorry to tell you your country is run by a bunch of clowns, who very soon will run out of other people's money. That would normally be your business, but as the world's biggest economy, if America sneezes the rest of us get a cold. You seem to be borrowing money to the extent that you are about to get the plague, and where will that leave everyone else?
  • Reply 15 of 69
    $980k? That covers their power bill this month...next



    And agree with Entropys. Bloody American country-runners, they're more bothered about today than than tomorrow. Always have been, always will. Bash the last guy, bomb a minority country and spend, that's American policy.
  • Reply 16 of 69
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by skittlebrau79 View Post


    However Apple, like many other companies including Google and Microsoft, use the Double Irish tax loophole that assures them they pay virtually no taxes on those overseas profits either. They can't have it both ways; you either pay taxes in the US or you pay them overseas.



    I'm under the impression Apple doesn't employ the double fisted Irish or Dutch oven like MS and Google.
  • Reply 17 of 69
    Quote:
    Originally Posted by SolipsismX View Post


    But we're talking overseas profits. Profits that were not made in the US. Profits that will not come back to the US and therefore won't be used in the US so long as there is a 35% tax rate on them. Some US companies may have no choice because they don't make enough profit in the US to stay above water but Apple is not one of them. So what is better: getting 5% of tens of billions or 35% of nothing? As a US citizen I'm all for funneling more money back to this country.



    i think a better rate ought to be possible than 5%!!
  • Reply 18 of 69
    djsherlydjsherly Posts: 1,017member
    Quote:
    Originally Posted by SolipsismX View Post


    I'm under the impression Apple doesn't employ the double fisted Irish or Dutch oven like MS and Google.



    Regardless, it's not like it is any surprise to Apple, or any other multinational company, that they have to pay tax when the money is repatriated. Surely they knew this when they were (are) making money hand over fist overseas?



    EDIT: I a word.
  • Reply 19 of 69
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by djsherly View Post


    Regardless, it's not like it is any surprise to Apple, or any other multinational company, that they have to pay tax when the money is repatriated. Surely they knew this when they were (are) making money hand over fist overseas?



    EDIT: I a word.



    Sure, it's not a surprise, but that's not the issue. The issue is they have no reason nor legal obligation to bring move profits across countries so why would they at 35% interest rates.



    Assuming you are an American, imagine if you were charged 35% for moving money from one state bank to another even though you had plenty in the states you travel. You simply wouldn't move the money because the cost of doing business would be too high.
  • Reply 20 of 69
    I'm glad companies in the US don't get it so easy with the IRS. It seems here in the UK, all you have to do is have a few nice lunches with the top tax inspector and get your tax bill cut in half, and we are talking billions here. See Vodafone & Goldman Sachs.
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