Monday, September 24, 2018

Slow Earnings Repatriation


One goal of the Tax Cuts and Jobs Act of 2017 was to increase repatriation of overseas earnings. Broadly speaking, new repatriated earnings are not subject to additional taxes that were in force under the previous tax system. A common misconception is that most of the $3 trillion in foreign earnings earned held abroad by U.S. companies was sitting in stockpiles of cash. In the second quarter of 2018, companies repatriated $169.5 billion, which is up significantly from the $34.9 billion in the second quarter of 2017, but down from the $294.9 billion repatriated in the first quarter of 2018. Several factors have reduced the expected tax windfall, including a company’s desire to leave cash overseas for investment to foreign laws that limit a company’s ability to repatriate cash to the U.S.