Commerce Department Reports That U.S. Companies Have Repatriated Half a Trillion So Far Due to New Tax Breaks

In the second quarter, U.S. companies have repatriated $169.5 billion, according to a recent report from the Commerce Department.

To avoid U.S. taxes, companies often stockpile funds overseas. 

But the GOP’s tax overhaul signed into law by President Donald Trump last December is expected to encourage companies to keep business in the U.S. 

“The U.S. has made it more attractive for companies by establishing a tax of 15.5% for the one-time repatriation of cash. The tax for other noncash assets is even less at 8%,” writes Market Watch. “By contrast, the tax rate on profits returned to the U.S. from overseas was a much higher 35% before Trump signed the first corporate tax cuts in 31 years.”

With the new tax benefits, tech giant Apple is planning to bring the majority of its cash reserves back to the U.S. 

“With over $250 billion stashed overseas, Apple stands to pay roughly $40 billion under the deemed repatriation provision of the new law,” wrote Seeking Alpha in January. 

Besides Apple, at least 100 companies have given out bonuses to employees and boosted philanthropic donations. Many have also increased plans to do business in the U.S. 

According to the Commerce Department’s findings, there has been a $34.9 billion spike in repatriated funds compared to the year before. In the first quarter, U.S. companies returned $294.9 billion.

Trump has said that he expects $4 trillion to return to the U.S. 

However, this isn’t going to happen overnight. Most of these companies don’t have their funds just sitting in an off-shore bank account. 

“A lot of companies have a large liability, but they don’t have a large amount of cash sitting out there,” said Cory Perry, international tax senior manager at accounting firm Grant Thornton. “They have it invested in manufacturing or plants or have it in a holding company where it is deployed in other jurisdictions.”

Not to mention, depending on the country like in China and Brazil it’s not easy to pull cash and move it quickly due to local laws. 

But that doesn’t mean that companies aren’t going to return some of their profits from overseas. $465 billion has been returned so far, which is one-sixth of the $3 trillion estimated to be held overseas. 

“The Joint Committee on Taxation estimates the repatriation levy will generate $338.8 billion in tax revenue over 10 years. If cash and non-cash assets were to be repatriated in equal amounts that would equal corporations paying taxes on approximately $2.86 trillion,” writes Newsmax. 

Author’s note: Some media outlets are claiming the repatriation is not happening fast enough. But $465 billion, which is almost a half a trillion is certainly impressive and is no small feat for only three quarters.