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A Path to Repatriation?

November 14, 2016

U.S. firms are holding $2.5 trillion in profits outside the country (“offshore”) and saving themselves from billions of dollars in taxes. And they refuse to bring the money home, also known as “repatriation,” because of our 35 percent corporate income tax rate. In other words, firms don’t want to pay a high tax rate at home, when these profits have already been taxed abroad by the countries in which they were generated.


Unsurprisingly, lawmakers are having a difficult time convincing firms to repatriate their overseas profits. Also unsurprising is that our two main presidential candidates have differing ideas on the topic. Donald Trump wants to charge firms a one-time fee of 10 percent on money they repatriate, while also slashing the corporate income tax to 15 percent. This is expected to raise $150 billion in taxes as companies repatriate more than $1.5 trillion over a decade.


On the other side, Hillary Clinton intends to leave the corporate tax rate where it is and apply no discount on repatriated profits.


Another idea altogether, and one that I find quite intriguing, is the S&P Global Corporation’s report on “Rebuilding through Repatriation.” In essence, firms would be allowed to bring overseas profits home tax-free. In exchange, they would have to commit 15 percent of the money to infrastructure project funding via buying bonds from local governments. Per the plan’s projections, if only half the profits were repatriated, it would generate $150 billion in bond purchases and 300,000+ jobs in the short-term. The projects would be whatever states need – roads, bridges, airports, and so on.


I like the idea because there is a lot of money offshore and we’re also in a lot of debt, which makes infrastructure funding difficult. Could rebuilding our infrastructure be a win-win path towards repatriation?

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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