Wednesday, November 30, 2016
Scott D. Dyreng (Duke) presents Trade-offs in the Repatriation of Foreign Earnings (with Kevin S. Markle (Iowa) & Jon C. Medrano (Iowa)) at Pennsylvania today as part of its Tax Policy Workshop Series hosted by Chris Sanchirico and Reed Shuldiner:
We examine repatriations of foreign earnings that have been designated as indefinitely reinvested. U.S. firms can repatriate foreign earnings without an immediate tax cost when there is a domestic loss, which frees the earnings to be used domestically. But using the domestic loss to offset repatriation taxes reduces financial accounting income, and removes a real option to tax deferral. We show that firms are more likely to repatriate indefinitely reinvested foreign earnings in domestic loss years, but they are less likely to repatriate when financial reporting incentives are strong.
We also show that the factors that affect repatriation have changed relative to studies that examined repatriations prior to and during the repatriation tax holiday of 2004-2005.