As Apple holds $138B overseas, US Senate considers one-time tax break for repatriating cash

Posted:
in AAPL Investors edited June 2014
While Apple in the past has asked the U.S. government for a so-called "tax holiday" that would allow it to bring its massive cash hoard back to America, the iPhone maker may finally get its wish, as both Democrats and Republicans from the U.S. Senate said they are considering a one-time tax break.




Senators hope that a temporary reduction in taxes for bringing money back to the U.S. will replenish the federal Highway Trust Fund for road construction and repairs. The program is set to run out of funds by the end of August, according to Reuters.

Apple would potentially be the largest beneficiary of a U.S. tax holiday, as the company had $156 billion in cash at the end of its last quarter, with just $18 billion of it held domestically. The company indicated at the time that it has no plans to repatriate the massive $138 billion it holds overseas, saying that the high taxes it would be hit with would not be a valuable decision for shareholders.

The company has lobbied numerous times for a tax holiday that would incentivize bringing that money back to the U.S. Under current tax laws, companies face a 35 percent tax rate on profits generated outside the country.
As of last quarter, Apple held $156 billion in cash, with $138 billion of it overseas.
The last repatriation holiday in the U.S. came in 2004, when corporations were allowed to bring foreign profits at a tax rate of just 5.25 percent. That one-time offer came well before the introduction of Apple's iPhone, which has propelled the company to become one of the most profitable businesses in American history.

While a one-time tax holiday could be advantageous for Apple, the company has urged the U.S. government to enact more comprehensive tax reform that company officials believe could be beneficial for the economy. Last year, Apple urged elected officials to consider corporate tax reform with four key points, saying that any changes should:
  • Be revenue neutral
  • Eliminate all corporate tax expenditures
  • Lower corporate income taxes
  • Implement a reasonable tax on foreign earnings that would allow free movement of capital back to the U.S.
Apple is the largest corporate taxpayer in America, having paid $7 billion to the U.S. Treasury in fiscal 2013. Apple has said its payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year.

Apple and other companies pay a notoriously low international tax rate thanks to the use of corporations in Ireland, where the laws allow for legal tax havens to be established. The U.S. government investigated Apple and found that the company's international tax policies did not break any laws, though the European Commission announced earlier Wednesday that it also plans to investigate Apple for potential tax evasion.

Officials at Apple have adamantly claimed that the company pays all of the taxes that are legally required of it.

"Every single dollar," Chief Executive Tim Cook said last year. "We not only comply with the laws, but we comply with the spirit of the laws."
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Comments

  • Reply 1 of 112
    philboogiephilboogie Posts: 7,675member
    If they do this after the big boom multi product release this fall they're going to need a bigger boat.
  • Reply 2 of 112
    irelandireland Posts: 17,798member

    This seems like a no brainer to get $7.2 B of free money.

  • Reply 3 of 112
    jungmarkjungmark Posts: 6,926member
    I think a 10-15% tax rate would be ok to repatriate the cash. I am a shareholder and US citizen.
  • Reply 4 of 112
    richlorichlo Posts: 46member
    As the world becomes global in economy the tax laws need reforming otherwise this same problem will present itself in another few years.
  • Reply 5 of 112
    solipsismxsolipsismx Posts: 19,566member
    ireland wrote: »
    This seems like a no brainer to get $7.2 B of free money.

    At some point the US gov't will give in again. They certainly need the money more than Apple needs to bring it back to the states so I am expecting between a 5 and 8% rate on the tax holiday.
  • Reply 6 of 112
    macvictamacvicta Posts: 346member
    Is this before or after the Republicans impeach President Obama over Benghazi and Berghdahl?

    If the Republican party hadn't spent the last 6 years showing an unprecedented level of hostility toward our President, vehemently opposing him at every turn to appease their bloodthirsty base, bipartisan initiatives such as tax reform could've passed long ago. That the American people even consider handing these neanderthals more power in November is frightening.
  • Reply 7 of 112

    This is a damn no-brainer. Something like a 5%-10% tax rate would be appropriate. A number in the range would make the effective long-run tax rate for foreign income of US corporations about the same as that for corporations in the other major economies.

     

    Otherwise, this nonsense will just continue....

     

    Given the estimates I've seen ($1.5T stashed outside), even half of it brought back to US soil would generate $37.5B - $75B for the US government. Not to mention the fact that the money that is brought back will be spent in the US.

  • Reply 8 of 112
    SpamSandwichSpamSandwich Posts: 33,407member
    Good on Rand Paul for spearheading this, which is not mentioned in this story.

    This should be permanent and the tax rate should be 5%.
  • Reply 9 of 112
    Quote:

    Originally Posted by MacVicta View Post



    Is this before or after the Republicans impeach President Obama over Benghazi and Berghdahl?



    If the Republican party hadn't spent the last 6 years showing an unprecedented level of hostility toward our President, vehemently opposing him at every turn to appease their bloodthirsty base, bipartisan initiatives such as tax reform could've passed long ago. That the American people even consider handing these neanderthals more power in November is frightening.

    Quit the political nonsense. It's largely the Democrats that are against the repatriation tax holiday.

  • Reply 10 of 112
    Lol. The tax "break" is nothing but a sham.

    The US govt should skip the BS and kill the corporate tax on overseas earnings, which is basically what this achieves anyways.

    The reason Apple (and other companies) has been hoarding cash abroad for so many years is precisely because of the previous tax "break".
  • Reply 11 of 112
    jungmarkjungmark Posts: 6,926member
    Good on Rand Paul for spearheading this, which is not mentioned in this story.

    This should be permanent and the tax rate should be 5%.

    No way. Corps should not pay less than the middle class tax payer. 10-15% is more appropriate.
  • Reply 12 of 112
    adrayvenadrayven Posts: 460member
    They should just set the rate between 8-10% and reap the ongoing tax funds.. rather than leaving it at a world wide high of 35% (others, like Canada are under 10% for a standard rate) ..

    Keeping it at 35% just forces US based companies to leave funds across sea's and not move them until they 'temporarily' lower the rate anyway.
  • Reply 13 of 112
    Quit the political nonsense. It's largely the Democrats that are against the repatriation tax holiday.
    the Democrats (who feed from the same donation trough the Republicans largely do) were never against the tax holiday.

    However, with the dysfunctional opposition party, this was one of the few things they had left which they could bargain upon, which is why they delayed it.

    However, if this is true, it seems the Dems are figuring that with the completely crazy turn the Republicans have taken even the Chamber of Commerce is scarf of the Frankenstein they've created and figure they could bend a lot of the corporate donations their way (it is absolutely not a coincidence this rumor surfaced 1 day after a nutjob tea partier beat the 2nd House republican in the primary).
  • Reply 14 of 112
    adrayven wrote: »
    They should just set the rate between 8-10% and reap the ongoing tax funds.. rather than leaving it at a world wide high of 35% (others, like Canada are under 10% for a standard rate) ..

    Keeping it at 35% just forces US based companies to leave funds across sea's and not move them until they 'temporarily' lower the rate anyway.

    This probably makes the most sense. The tax "holiday" is a poor and distortion art way to achieve what is nothing but a tax reduction. Cut the tax rate down to what you suggest permanently.
  • Reply 15 of 112
    MacProMacPro Posts: 19,778member
    This is going be a good year for AAPL ....
  • Reply 16 of 112
    Quote:

    Originally Posted by addicted44 View Post



    the Democrats (who feed from the same donation trough the Republicans largely do) were never against the tax holiday.

    Are you kidding? Look at the list of who's been leading the charge against this in the past few years: it's folks like Max Baucus, Kent Conrad, Barbara Boxer, and Carl Levin in the Senate.

     

    (I won't post on this specific issue anymore, since it runs the risk of turning the thread political).

  • Reply 17 of 112
    Basically Apple is telling the government that we have cheated you out of taxes and now want amnesty.Letting Apple bring home this 138B will not create a single job that they where not already planning on creating. Its great for Apple but whats in it for America?
  • Reply 18 of 112
    Why kill the tax rate? Individuals are getting tax on their worldwide earning. It is bullshit that corporations get a tax holiday. When is the last time that individuals get a tax holiday? I am all for tax reform but it should happen to everybody - individuals and corporations alike. Simplify the tax code to a flat tax on all earnings.
  • Reply 19 of 112
    Quote:

    Originally Posted by sog35 View Post

     

    That makes no sense.

     

    Corps profits are transferred to shareholders.  Those shareholder then pay taxes on dividends and capital gains.  Basically the Corporations tax burden is paid by shareholders.  So why the hell does the Corp need to pay ADDITIONAL TAXES?


    Agreed. Not to mention that most of the corporate taxes are ultimately mostly or wholly passed on to us, the consumer. We simply pay a higher price.

     

    This is one area where the Europeans are light years ahead of the tax luddites in the US: value-added tax, low corporate taxes, and a territorial (as opposed to a worldwide) system of taxation of foreign income (i.e., a system where you are presumed to have paid your fair shares of taxes abroad regardless of what the foreign country's tax rate is).

  • Reply 20 of 112
    eightzeroeightzero Posts: 3,094member
    Quote:

    Originally Posted by anantksundaram View Post

     

    Are you kidding? Look at the list of who's been leading the charge against this in the past few years: it's folks like Max Baucus, Kent Conrad, Barbara Boxer, and Carl Levin in the Senate.

     

    (I won't post on this specific issue anymore, since it runs the risk of turning the thread political).


    Haha. Risk turning a political thread political. After you get the last word, naming names, and then giving no citations. Well done.

     

    If only there was an economist in the house. *cough* Cantor *cough*

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