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US Firms Amass More Untaxed Foreign Earnings

Ohanian Comment: Topping the list with untaxed earnings are G. E. and Microsoft. US taxpayers should realize this gives people like Bill Gates money to play with in deforming public education.

by Kevin McCoy

@kmccoynyc USA TODAY

The amount of money that major U.S. firms such as Apple, Google and Microsoft holds overseas beyond the reach of the IRS continues to mount as Washington efforts to revise the federal tax code remain stalled.

The 10 firms with the largest stockpiles of indefinitely reinvested foreign earnings â revenue not subject to U.S. corporate income tax â collectively hold at least $724 billion of the funds, a review of financial filings shows.

The total rose $40.8 billion, or 5.6%, in less than a year as the firms provided updated data on the holdings in annual reports filed with the Securities and Exchange Commission.

Though massive, the total represents just the top slice of the more than $2.3 trillion in total foreign earnings U.S. firms hold in overseas subsidiaries.

âItâs been a pretty steady increase,â said Martin Sullivan, chief economist for Tax Analysts, an independent provider of tax news and analysis. Citing a political stalemate on federal tax overhaul, he added, âThereâs no reason at all to expect the trend to change.â

Audit Analytics, an independent research provider that issues annual reports on untaxed foreign earnings, compiled the updated top ten list at USA TODAYâs request from a review of the companies most recent SEC filings.

The overseas holdings reflect the financial results of an increasingly globalized business world, as well as the success U.S.based multinational firms have had in shifting earnings to countries with tax rates lower than the 35% top federal tax rate for businesses, the worldâs highest.

Foreign earnings are not taxed by the IRS unless and until the companies move the revenue home. But transfers are unlikely because the shifts would trigger a major tax hit.

In addition to tech giants Apple, Microsoft and Google â now known as Alphabet â the top ten list includes major health care firms Pfizer, Johnson & Johnson and Merck, along with iconic conglomerate General Electric.

Keeping corporate earnings overseas in low-tax havens helped nine of the top 10 companies reduce their effective tax rates below the 35% U.S. top rate. Google reported the lowest rate, a 19.3% levy, and energy giant Exxon Mobil (XOM) reported the highest, a 41% rate, SEC filings show.

Sullivan characterized the federal tax hit imposed on foreign earnings that U.S. companies bring home to their domestic bases as âan unproductive artifact or our tax system that should be removed.â

However, Capitol Hill has been unable to reach agreement on calls for changing that provision.

Partly as a result, Pfizer last month announced plans for a $160 billion merger with Ireland-based rival Allergan (AGN). If finalized, the deal would result in the New York-based pharmaceutical company shifting its headquarters to Dublin and benefiting from Irelandâs 12.5% business tax rate.

âMore and more of our tax base is eroding into an international sea of harmful tax practices and ruinous tax competition,â Sen. Ron Wyden, D-Oregon, said during a Tuesday hearing on tax policy.

— Kevin McCoy
USA Today





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