More than $2 trillion in foreign profits were held by U.S. corporations abroad in 2013, says Reuters.
U.S. corporations do not pay income tax on their overseas profits (something known as income tax deferral) unless they bring those profits back into the United States.
- Between 2008 and 2013, the amount of profits held overseas by American corporations almost doubled.
- General Electric alone had $110 billion overseas, followed by Microsoft (at $76.4 billion), Pfizer (at $69 billion) and Merck (at $57.1 billion).
This corporate tax issue has been at the center of congressional debate on tax reform. Some lawmakers have advocated getting rid of offshore deferral, and others have pushed for a “tax holiday” that would allow these corporations to bring foreign profits back into the United States at a low tax rate. Democratic Senator Max Baucus, former finance committee chairman, had made a number of tax reform proposals before leaving to become ambassador to China. Senator Ron Wyden has taken over Baucus’ post.
Analysts do not anticipate any real reform action until after the mid-term elections in November, but Americans can expect to see a push for a tax code overhaul in 2015.
Source: Kevin Drawbaugh and Patrick Temple-West, “Untaxed U.S. Corporate Profits Held Overseas Top $2.1 Trillion: Study,” Reuters, April 8, 2014.
