Wednesday, June 25, 2008
New York Times: A One-Time Tax Break Saved 843 U.S. Corporations $265 Billion, by Lynnley Browning:
More than 840 of the largest American corporations reaped a $265 billion windfall thanks to a one-time tax break aimed at bringing home profits stashed overseas, according to recent government data. The windfall resulted from a temporary tax deduction for big corporations, which were keeping billions of dollars in profits in overseas subsidiaries and out of the hands of the IRS. The total amount brought back to the United States was far above some estimates ...
American companies can typically defer paying taxes on foreign profits as long as they keep that money outside the U.S. When companies bring the money back, they usually pay the top corporate tax rate of 35%. In recent years, the biggest and wealthiest companies in the U.S. have increasingly set up foreign subsidiaries and used them either as foreign operations or offshore repositories. The subsidiaries, many in offshore tax havens like the Netherlands, Ireland and the Cayman Islands, collectively held about $804 billion in foreign profits on which their American corporate parents had yet to pay any U.S.taxes, according to the IRS A one-time tax holiday enacted by Congress in 2004 offered companies the chance to bring that money back at a reduced tax rate of 5.25%.
In all, 843 corporations took advantage of the offer, according to recent IRS statistics of income data, bringing back $362 billion in foreign profits, paid to the parent corporations as dividends. Of that amount, $312 billion qualified for the tax break, giving those companies total tax deductions of $265 billion claimed from 2004 through 2006. ...
Supporters of the tax break say it was a success because it brought about $18 billion into Treasury coffers that otherwise would have stayed overseas. The nonpartisan Joint Committee on Taxation, a Congressional agency, had estimated that the tax break would bring in only $2.8 billion, a sixth the actual amount.