This is just more proof that tax law is driving American companies off shore as much as anything.
U.S. corporations, including Colorado companies, will bring back more than $200 billion from overseas earnings this year to take advantage of tax benefits under the American Jobs Creation Act of 2004.
The act is designed to encourage a flow of foreign-made profits back to the United States so the money can be invested here. In order to qualify for the tax benefit, “you clearly have to have a re-investment plan to invest the money in the United States,” said Mark Betker, a director of international tax practice in the Denver office of PricewaterhouseCoopers.
That re-investment plan, which the company’s board of directors must approve, can include domestic job creation, capital investments and acquisitions, he said.
Among the factors influencing a company’s decision on the tax break are:
The tax rate in the foreign country where the profits are earned.
The disallowance of certain deductions under the tax break.
The results from aggregating profits and losses of all foreign operations under the subsidiaries of the parent company.
The size of the earnings to be repatriated, which can depend on how many years of accumulated earnings haven’t been repatriated.
Whether a company repatriates earnings partially depends on how much it needs to bring cash back to the United States and how much it wants to re-invest the foreign profits in foreign operations, acquisitions, or research and development.
To paraphrase Bill Clinton (which I never thought I would… ) “It’s the Tax Law Stupid!”
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