U.S. companies have moved cautiously in repatriating profits stockpiled overseas in response to last year’s tax-law rewrite, after the Trump administration’s assertions that trillions of dollars would come home quickly and supercharge the domestic economy.
The tax-law revamp ended the practice of taxing U.S. companies when they bring home foreign profits. Companies long complained that profit earned abroad was trapped and held it in foreign subsidiaries to avoid additional taxes.
The new law imposes a one-time tax on those old earnings—whether or not money is repatriated. It also removes federal taxes on subsequent repatriations and makes future foreign profits generally free from U.S. taxes.
“We expect to have in excess of $4 trillion brought back very shortly,” President Trump told executives assembled at his golf course in Bedminster, N.J., in August. “Over $4 [trillion], but close to $5 trillion, will be brought back into our country. This is money that would never, ever be seen again by the workers and the people of our country.”
The Wall Street Journal reviewed securities filings from 108 publicly traded companies accounting for the vast majority of an estimated $2.7 trillion in profits parked abroad, and asked each company what it was doing with the funds. In their filings and responses, they said they have repatriated about $143 billion so far this year.
About two-thirds of the money came from two corporations—networking-equipment giant
Beyond that, companies have announced plans to repatriate an additional $37 billion. Some with the largest stockpiles, including
have made general promises to repatriate profits without saying when or how much.
More than a dozen large companies, including
, have said they don’t need past foreign earnings in the U.S. or have no immediate plans to bring cash home. Far more are waiting or won’t say.
Many provided no information beyond vague public filings. That includes
and other companies that held some of the largest foreign cash piles before the tax law.
In all, while repatriations have soared past pre-2018 levels, independent analysts don’t expect anywhere near the $4 trillion Mr. Trump has touted.
KThe government figure includes small and closely held firms and surpassed the total repatriated in all of 2016 and 2017 combined.
More than $35 billion of that government estimate reflects funds routinely repatriated on a quarterly basis before the tax overhaul. An unknown amount also reflects new profits earned since December and never subject to repatriation taxes, as opposed to stockpiled past profits. Some may be from companies that have brought money back but haven’t publicly disclosed it.
The Commerce Department is scheduled to provide new data on second-quarter repatriations Sept. 19.
Lindsay Walters, a White House spokeswoman, said $3.9 trillion is a “plausible lower bound” for past corporate profits offshore and cited the first-quarter data. “There are reasons to expect that pace to remain strong, as large scale corporate financial decisions like this aren’t made overnight,” she said. “As a businessman, the president understands that.”
Because repatriation is now rarely a costly event, companies have been telling investors less about their plans.
Apple stopped disclosing how much cash it holds overseas, deeming the figure no longer material. The $252 billion of foreign cash it reported last year was more than 90% of the total on its books. In January, Chief Executive Tim Cook said Apple would bring the “vast majority” to the U.S. “over time” as part of its investments in the U.S. A spokesman wouldn’t elaborate.
Companies use much of the repatriated money to buy back shares. A study by Federal Reserve economists of 15 companies with the most foreign cash found an uptick in buybacks and little evidence of an investment surge.
Cisco said it brought $70 billion of foreign profits to the U.S. this year—about half the total repatriations identified by the Journal, and more than the $67.5 billion in cash and investments the company reported holding overseas last year. Cisco this year announced plans to repurchase $25 billion in shares over two years. It has spent $14.5 billion on buybacks through July.
“All of our cash basically is repatriated all the time now,” Cisco Chief Financial Officer Kelly Kramer said in February. “We’re going to be giving back to the shareholders through a healthy buyback.”
Kevin Hassett, chairman of Mr. Trump’s Council of Economic Advisers, has argued that buybacks benefit the economy by getting money to shareholders who then reinvest it in companies with domestic opportunities.
Democrats point to buybacks as evidence the tax law is helping investors more than workers. Economists in both parties said other features of the revamped law are likely to have bigger economic effects than repatriations.
The often-cited figures of $2.7 trillion or $3 trillion held abroad by U.S. companies overstate what could realistically return. Only about half was in cash or other liquid assets, according to Todd Castagno, a Morgan Stanley accounting and tax-policy analyst.
& Co. moved $9 billion from overseas and said it is using the money for acquisitions, employee stock grants, pension funding and other investments. “We’re bringing it back to the U.S. and putting it to work,” CEO Dave Ricks said in an interview.
Some companies, such as
Archer Daniels Midland
, have long plowed foreign profits into foreign factories, equipment and other assets that aren’t likely to move. Other companies said they need funds overseas for acquisitions, debt retirement and expansion in growing markets. Moreover, foreign regulators require banks and other financial companies to maintain substantial capital reserves abroad. Those corporations don’t plan to bring much cash home.
Even without the federal government taxing new foreign income as it comes home, costs remain to moving cash across borders. Some U.S. states tax repatriated profits, and some countries impose taxes on dividends paid to parent companies.
“It’s not completely frictionless,”
CFO Akhil Johri said in an interview. Still, the new rules made it easier to move money globally. Bringing cash home reduces the company’s need for U.S. borrowing, Mr. Johri said.
United Technologies, the conglomerate that makes Otis Elevators and Pratt & Whitney jet engines, repatriated $5.1 billion this year. The money will help fund its planned $23 billion acquisition of
a defense contractor and aviation-equipment maker, United Technologies said.
Technical rules for the one-time U.S. tax on stockpiled profits aren’t final, leaving some companies wary of making big changes too soon. That tax, payable over eight years, is expected to bring in $339 billion, according to a federal estimate.
“Sometimes you just can’t move cash from point A to point B by just pushing a button,” said Scott Levine, a tax partner at the law firm Jones Day LLP who represents multinational corporations. “We find ways to get the cash home, but you’re always half-worried that there’s something you didn’t read right.”
Many companies don’t have urgent domestic cash needs. They can borrow cheaply at home because of low interest rates or they are focusing on expanding in foreign markets.
Mr. Castagno of Morgan Stanley estimates repatriations totaled $150 billion to $200 billion in the second quarter. He projects they will remain above 2017 levels, then taper off over many quarters.
Before Republicans rewrote the tax code last year, the U.S. taxed companies’ world-wide income at 35%, offset by tax credits for payments to foreign governments. Companies could defer U.S. taxes by leaving the money overseas.
“The [previous] tax law trapped their cash abroad but it didn’t change what they did because they could borrow domestically,” said Jeff Hoopes, an accounting professor at the University of North Carolina’s Kenan-Flagler Business School.
In 2004, Congress gave companies a one-time discount on repatriating foreign profits, offering a 5.25% tax rate. Companies brought money back, then resumed stockpiling foreign profits.
Companies lobbied to repeat that 2004 holiday, but GOP lawmakers and President Barack Obama balked. By 2014, Republicans settled on the approach that became law last year: a one-time tax of 15.5% on liquid assets held overseas and 8% on everything else, with no tax when funds move from overseas subsidiaries to the U.S.
Companies now face a complex minimum tax on new foreign earnings, but it won’t pinch them as hard as repatriations did under the old system.
Many executives say the changes and accompanying tax-rate cut made the U.S. a more attractive place to do business.
said this month it would repatriate $5 billion and invest in domestic operations.
GE doesn’t plan significant repatriations. In a statement, the company said its foreign profits were largely reinvested in noncash assets.
“While we do not plan on repatriating a significant amount of cash from offshore in the near term, the new tax law is beneficial in the long term,” the company said. “It gives us greater flexibility when it comes to allocating capital.”
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