One-time tax holiday for Apple's overseas cash gains traction in D.C.
Apple today has over $150 billion worth of cash in the bank. Only problem is, the vast majority of that cash (~$138 billion) is held in overseas accounts. For some time now, Apple has been reluctant to bring that cash back to the United States because it would be subject to a 35 percent corporate income tax -- the highest rate anywhere in the world. Indeed, Apple's reluctance to brings its cash back stateside is why the company decided to issue debt to fund its ever-increasing capital return program.
For quite some time, Apple and a number of other blue chip companies with vast cash holdings overseas have made it known that they'd love some sort of one-time tax holiday that would allow them to bring their cash over without taking a 35 percent hit. Now comes word via Reuters that the idea may be gaining traction in the halls of Washington.
Top Senate Democrats and Republicans on Tuesday said they were considering offering American companies a one-time tax break if they repatriate profits stashed abroad.
The senators anticipate the proposal would generate a windfall in revenue that would be used to fund federal transportation projects.
U.S. Senate Minority Leader Mitch McConnell told reporters in the Capitol that Republicans had discussed a corporate tax repatriation "holiday" idea and "it enjoys a good deal of support in our conference."
Back in May of last year, Tim Cook touched on the topic of a tax holiday during an interview with the Washington Post.
"If you look at it today, to repatriate cash to the US, you need to pay 35 percent of that cash," Cook said. "And that is a very high number. We are not proposing that it be zero. I know many of our peers believe that. But I don't view that. But I think it has to be reasonable"
Supporters of the tax holiday argue that enabling companies like Apple to repatriate billions of dollars in foreign cash at a significantly reduced tax rate would provide a much needed influx in federal funds. In particular, supporters articulate that the resulting revenue could help replenish the quickly depleting Highway Trust Fund.
While no legislation has yet been put into motion, it has to be encouraging to Apple that the powers-that-be are talking. The last time Congress allowed a tax holiday was in 2004 when companies were able to bring back their foreign cash at a paltry 5.25 percent tax rate.
