By Ginger Gibson | WASHINGTON <\/p>\n
WASHINGTON Major U.S. multinationals are pushing the Trump administration to deepen the tax break it has already tentatively proposed on $2.6 trillion in corporate profits being held offshore, a key piece in Washington's intricate tax reform puzzle. <\/p>\n
As President Donald Trump tries to deliver on his campaign promise to overhaul the tax code, lobbyists for technology, drug and other manufacturers are working with officials behind closed doors, six lobbyists working with various industries told Reuters. <\/p>\n
In line with tax cuts already embraced by Republicans in the House of Representatives, the lobbyists said they are telling the White House and Treasury Department that if companies are forced to bring home, or repatriate, foreign earnings, they want a sharply reduced tax rate. <\/p>\n
The lobbyists are making an aggressive case that cutting the tax rate on offshore profits to 10 percent from 35 percent, as the administration has indicated it may favor, is not enough. <\/p>\n
Rather, the lobbyists said they want a lower, bifurcated rate of 3.5 percent on earnings already invested abroad in illiquid assets, such as factories, and 8.75 percent on cash and liquid assets. <\/p>\n
During the 2016 presidential campaign, Trump proposed setting the rate at 10 percent, and argued it could be used to raise tax revenue to pay for tax cuts or infrastructure. <\/p>\n
Discussion of hard numbers in the long-running repatriation debate may indicate tax reform is advancing on Trump's slow-moving domestic policy agenda. Or it may just be lobbyists trying to set the early framework for a long slog ahead, which could be adjusted if they get concessions elsewhere. <\/p>\n
\"For us, its how you create a tax environment where you give business long-term certainty,\" one lobbyist said. <\/p>\n
The changes being discussed are part of larger tax reform, another lobbyist said: \"Our international tax system is out of whack with the rest of the world. This system is not sustainable.\" <\/p>\n
LATEST PUSH IN LONG CAMPAIGN <\/p>\n
The lobbyists' demands represent the latest effort in a push by corporate America that has been under way since 2004-2005, the last time Washington let multinationals pay only a small fraction of the taxes due on their foreign profits. <\/p>\n
Repatriation and comprehensive tax reformare important to the economy, Apple Inc (AAPL.O) CEO Tim Cook said earlier this month on CNBC. \"The administration ... they're really getting thisand want to bring this back and I hope that that comes to pass,\" he said. Apple held $239.6 billion of cash and securities offshore as of April 1. <\/p>\n
Under current law, U.S.-based corporations are supposed to pay 35-percent income tax on profits worldwide. But companies can defer that tax on active profits left outside the country. <\/p>\n
The deferral rule has incentivized multinationals to park profits offshore and about $2.6 trillion in earnings is being held overseas by more than 500 U.S. companies, according to Audit Analytics, a corporate research firm. <\/p>\n
Nearly a third of that is held by 10 companies, including Apple, Microsoft Corp (MSFT.O), Pfizer Inc (PFE.N) and General Electric Co (GE.N), the firm said. All four of those companies declined to comment. <\/p>\n
These companies and hundreds of others could bring their foreign profits into the United States at any time, but they do not in order to avoid paying the 35-percent tax due. <\/p>\n
If the $2.6 trillion overseas were repatriated at once, two things would happen. First, Washington would get a big jolt of tax revenue. Second, repatriated profits not collected by the Internal Revenue Service could be put to use in the economy. <\/p>\n
As the law stands, tax-deferred profits can be held offshore indefinitely. The result of that has been companies biding their time, claiming their profits are \"trapped\" offshore while lobbying for a repatriation tax cut. The last time they got one was in 2004-2005 under former President George W. Bush, whose administration let multinationals voluntarily repatriate profits at a 5.25 percent tax rate. <\/p>\n
At the time, Bush tried to extract promises from companies that they would dedicate repatriated funds to investments in new plants and other job-creating projects. <\/p>\n
But in a 2011 follow-up study, a Senate committee concluded the Bush repatriation tax \"holiday\" cost the Treasury at least $3.3 billion in net revenue over 10 years and \"produced no appreciable increase in U.S. jobs or domestic investment.\" <\/p>\n
Rather, the repatriated funds largely went to shareholder dividends and executive bonuses, the committee said. <\/p>\n
The repatriation tax break now being discussed differs from Bush's: repatriation would not be voluntary, but mandatory, so foreign profits would have to be brought home. <\/p>\n
In addition, lobbyists said they have talked to the administration about ending deferral and exempting foreign profits from taxation. The administration has floated this as an option. Lobbyists said there has been discussion about limiting that exemption to 95 percent of repatriated foreign earnings. <\/p>\n
(Editing by Kevin Drawbaugh and Bill Rigby) <\/p>\n
Puerto Rico on Wednesday willface investors for the first time in a bankruptcy court, as it kicks off the biggest and most divisive debt restructuring in U.S. public finance history. <\/p>\n
WASHINGTON The Trump administration's top trade officials hope to keep the North American Free Trade Agreement as a trilateral deal in negotiations with Canada and Mexico to revamp the 23-year-old pact, senators said on Tuesday. <\/p>\n
WASHINGTON\/RIYADH When U.S. President Donald Trump meets Saudiprincesin Riyadh on Saturday, hecan expecta warmer welcome than the one given a year ago to his predecessor Barack Obama, who Riyadh considered soft on arch foe Iran and cool toward a bilateral relationship that is amainstay of the Middle East's security balance. <\/p>\n
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