Bloomberg News/Landov
American companies have returned some of their profits held overseas after President Trump cut corporate taxes for the first time in 31 years, but most of their $3 trillion moneypot remains parked offshore.
The government on Wednesday said U.S.-based companies returned almost $170 billion in cash in the second quarter. Firms had returned $295 billion in first quarter.
Now $465 billion in “repatriated” cash is not exactly chump change. Yet it’s only about one-sixth of an estimated $3 trillion or more in profits that U.S. companies have parked overseas. President Trump said the tax law would result in $4 trillion being repatriated, generating more investment and jobs in the U.S.
The U.S. has made it more attractive for companies by establishing a tax of 15.5% for the onetime repatriation of cash. The tax for other noncash assets is even less at 8%.
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.
The new tax law also requires U.S. parent companies to pay a one-time tax on their accumulated earnings held abroad.
While the new onetime tax rate is alluring, companies must juggle with a host of issues. For one thing, the Internal Revenue Service still hasn’t finalized rules on which profits fall under rubric of the repatriation tax.
Firms may want to keep much of their profits overseas because they plan to expand operations outside the U.S. in markets where sales are growing.
How it all plays out remains to be seen, but even without all the overseas profits returning home, the U.S. economy is booming.