Apple Says It Will Bring Cash Back To U.S., Pay $38 Billion In Repatriation Tax | Touch Latest Local,World,Tech,Entertainment,Health,Sport News
20 April 2018 00:00:00 AM Breaking News

• WORLD

Apple Says It Will Bring Cash Back To U.S., Pay $38 Billion In Repatriation Tax

Apple is bringing cash home. That was the announcement from the tech giant in a statement on its website, saying:

Apple, already the largest US taxpayer, anticipates repatriation tax payments of approximately $38 billion as required by recent changes to the tax law. A payment of that size would likely be the largest of its kind ever made.


As of September 30, 2017, the company's SEC filings indicated that cash, cash equivalents and marketable securities held by its foreign subsidiaries totaled $252.3 billion. The company noted on the filing that "Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S."


Assuming that Apple is repatriating cash (or cash equivalent), under the new 15.5% repatriation tax rate, that means the company plans to repatriate just over $245 billion which would be close to the total held overseas. An email to the company confirming that to be the case was not immediately returned.


Before the new tax law, U.S. companies were subject to tax on all profits, no matter where they were earned. That changed under tax reform. Now, U.S. companies only pay tax on profits earned in the U.S. However, companies like Apple had already stockpiled assets overseas since bringing the funds over to the U.S. would have triggered a tax.


Under the new tax law, Congress implemented a one-time "repatriation" tax to encourage companies to bring those funds back. The idea is that freeing up cash previously held overseas should spur investing and create jobs in the U.S. However, a study by the Center on Budget and Policy Procedures (CBPP) showed that hasn't always been the case: During a 2004 tax holiday, most companies took advantage of savings by paying dividends or buying back stock. As for jobs? Pfizer, Merck, Hewlett-Packard, Ford, and Pepsi repatriated money and subsequently laid off employees.


Apple has indicated that won't be the case when it comes to their company. The statement on the website added that "Combining new investments and Apple’s current pace of spending with domestic suppliers and manufacturers — an estimated $55 billion for 2018 — Apple’s direct contribution to the US economy will be more than $350 billion over the next five years, not including Apple’s ongoing tax payments, the tax revenues generated from employees’ wages and the sale of Apple products."


Apple had previously drawn fire for parking massive amounts of cash offshore. In 2010, Steve Jobs, then Apple CEO, noted that the company was holding onto cash waiting for "one or more unique strategic opportunities." Around that same time, the tech giant signed the lobbying firm of Fierce, Isakowitz and Blalock of Washington, D.C., which many considered to be a first step towards wooing those in Congress that might be more friendly to their tax and privacy concerns.


In 2016, Apple CEO Tim Cook said that he wouldn't bring over Apple's overseas funds "until there’s a fair rate." At the time, Apple was said to hold more $230 billion in cash offshore. At a 40% tax rate, including state tax rates, that would have worked out to a cool $92 billion. To put that into perspective, at the time that was twice the annual budget for the Department of Homeland Security (downloads as a pdf).


Today, however, Cook stressed the company's commitment to the US economy, saying, "Apple is a success story that could only have happened in America, and we are proud to build on our long history of support for the US economy. We believe deeply in the power of American ingenuity, and we are focusing our investments in areas where we can have a direct impact on job creation and job preparedness. We have a deep sense of responsibility to give back to our country and the people who help make our success possible."


Apple shares appeared to climb on the news, up 1.42% to $178.69 as of 3:23 pm EST.

You can read the entire statement from Apple here.

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