Overnight, several news outlets indicated that Congress is once again considering action on the staggeringly massive cache of untaxed (from a US tax perspective) foreign earnings of US companies, for the moment “permanently” parked overseas.
Of course, the reality is that nothing will happen in an election year, and the corollary reality is that any move to tax those amounts would have to be coupled to an overall reform of the US tax code (to avoid some obvious macro-economic damaging of our still nascent US recovery). [For reference, my May 2013 backgrounders are here, and here -- on the whole topic more generally.]
An overall tax code overhaul last happened in 1986, under Reagan. So — don’t hold your breath, here. However, with Merck among the top six or so US companies with such parked cash, I thought I’d remind readers of the relatively sound (and therefor likely unpassable!) idea out of the Senator from Colorado. I mentioned it last in early March.
The idea is that GE, Merck, Google, Microsoft and Apple and Abbott will buy (actually, Dutch-auction bid upon) US infrastucture bonds — and thus commit essentially to the rebuilding of roads, bridges and schools, nation-wide – and in so doing — be granted a “tax holiday,” for a like (or slighly lesser) amount of the permanently-foreign cash earnings, sitting anywhere in the EU, Japan, Northern Ireland, or the Caymans — depending on the company. So. . . Merck could bring home all the ex-US cash it wanted, tax free, if it put it all to work, here in the US — on rebuilding infrastucture, via a federal bond progam. In about 10 years’ time, when Merck has collected the interest on the bonds it bought — the principal would be repaid by the US Treasury, and be repatriated earnings free of tax. Just a time lag — that’s all. And the whole program is dyed deeply-blue in patriotism. I love it.
And, like I say — small chance of passage. And certainly not this election cycle. Finally, for those of us who have done a lot of this sort of structuring, there is always a tax-advantaged way (or two!) to bring the cash home. I’d expect Merck to do so — maybe as early as 2015 — for at least a part of the parked earnings. Here endeth the prognostication(s).