TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, January 21, 2018

The Big Winners In Apple's Tax Bonanza: Shareholders

Apple LogoFollowing up on Thursday's post, Apple To Pay $38 Billion In Taxes To Bring Cash Hoard Back To U.S. And Build U.S. Campus:  Wall Street Journal, Apple’s Big Cash Winners: Shareholders:

Apple announced a $38 billion tax windfall for the U.S. government this week, but the biggest beneficiary of the company’s response to tax-system changes will likely be its shareholders.

The tech giant’s plan to bring back to the U.S. most of its $252.3 billion in overseas cash holdings is expected to lead to a large increase in share buybacks and dividends, say analysts, tax experts and investors. Of broader benefit to investors, the change in tax law should boost Apple’s bottom line by cutting its effective tax rate. It also could prompt the company to ramp up acquisitions and research-and-development spending to reduce its iPhone dependency, an abiding concern of some shareholders. ...

The iPhone maker has been pumping cash to shareholders since fiscal 2012, with $234 billion in share repurchases and dividends, funded by borrowing and the cash its business generates. Last year it said it expects the total to hit $300 billion by March 2019.

Loup Ventures, a venture-capital firm specializing in tech research, now expects Apple to announce an increase of between $125 billion and $150 billion in buybacks and dividends through 2020—pushing the total target as high as $450 billion. Loup attributes $88 billion of that increase to the new tax system, pegging $71 billion for buybacks, $12 billion for a one-time special dividend and $5 billion in dividend increase over two years.

The projected $88 billion for investors compares with the roughly $75 billion that Apple said it plans to contribute over the next five years to the U.S. economy through capital expenditures, investments in U.S. manufacturing, and its $38 billion tax commitment.

“I think they have struck the right balance between the fat cats and the everyday person,” said Gene Munster, Loup Ventures’ managing partner.

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