As Labor Day weekend approaches, a tanned and rested Congress is poised to return to Washington to hash out corporate tax changes. Much of the debate over corporate tax reform in Washington sensibly focuses on how to encourage Fortune 500 corporations to repatriate and pay U.S. taxes on the $2.1 trillion on profits they have declared to be “permanently reinvested” (and thereby free of U.S. taxes) overseas. But an overlooked fact in this debate is just how much tax companies have avoided by keeping these profits (on paper, at least) offshore. An April 2015 CTJ report estimates that Fortune 500 corporations likely have avoided $600 billion in federal income taxes on these offshore profits.

Corporations declaring their intention to keep profits permanently offshore are required to estimate, if possible, the amount of U.S. tax they would pay if they repatriate these profits. Most companies legally avoid complying with this rule simply by declaring that it is too complex to make the calculation. But CTJ went through corporate filings and found 57 Fortune 500 corporations do comply. (See table below for details) These companies estimate they would pay a 29 percent tax rate on repatriation. (Since the federal tax on repatriated profits is 35 percent minus any taxes already paid to foreign countries, this means these companies have paid an average tax rate of just 6 percent on these profits, an indicator that much of this income is being kept in low-rate tax havens.)

Hundreds of other companies with offshore cash fail to make this disclosure, so it is impossible to know precisely how much corporate income tax they have avoided on their offshore cash. But if these companies, which include notorious tax avoiders General Electric, Pfizer, Merck and IBM, owed tax at the same 29 percent average rate reported by disclosing companies, the unpaid tax bill on Fortune 500 corporations’ offshore cash would be $600 billion (that is, $2.1 trillion times 29 percent). Since almost two-thirds of Fortune 500 corporations disclose owning subsidiaries based in offshore tax havens, it seems likely that many of these corporations are sheltering their “permanently invested” profits in these havens.

President Obama and congressional tax writers are sensibly focusing their energies on finding a way to make companies with offshore cash pay at least some tax on these profits. But Obama has proposed a tax rate of just 14 percent, less any foreign taxes already paid. (Republicans in Congress will likely propose a tax rate much lower than that.) This would bring in just $220 billion. That’s nearly $400 billion less than the full amount owed. CTJ’s finding suggests that any plan that would bring in less than $600 billion would amount to yet another giveaway for corporate tax dodgers. It’s time these offshore tax dodgers pay what they owe.

 


57 Companies That Disclose Likely Tax Payments from Repatriation
  Unrepatriated Estimated    
  Income Tax Bill Implied Implied Foreign
Company Name $ Millions $Millions Tax Rate Tax Rate
Hertz Global Holdings   $ 475  $ 184 38.7% 0.0%
Owens Corning  1,400 511 36.5% 0.0%
Safeway  180 65 36.1% 0.0%
Amgen  29,300 10,500 35.8% 0.0%
Qualcomm  25,700 9,100 35.4% 0.0%
Gilead Sciences  15,600 5,500 35.3% 0.0%
Wynn Resorts  412 144 35.0% 0.0%
Advanced Micro Devices  349 122 35.0% 0.0%
AK Steel Holding  27 10 34.9% 0.1%
Biogen Idec  4,600 1,550 33.7% 1.3%
Western Digital  8,200 2,700 32.9% 2.1%
Apple  157,800 51,615 32.7% 2.3%
Microsoft  92,900 29,600 31.9% 3.1%
Nike  6,600 2,100 31.8% 3.2%
PNC Financial Services Group  77 24 31.2% 3.8%
American Express  9,700 3,000 30.9% 4.1%
Oracle  32,400 10,000 30.9% 4.1%
FMC Technologies  1,619 492 30.4% 4.6%
Baxter International  13,900 4,200 30.2% 4.8%
NetApp  3,000 896 29.9% 5.1%
Symantec  3,200 918 28.7% 6.3%
Wells Fargo  1,800 513 28.5% 6.5%
Group 1 Automotive  17 5 28.1% 6.9%
Jacobs Engineering Group  26 7 28.0% 7.0%
Leucadia National  171 46 26.9% 8.1%
Clorox  186 50 26.9% 8.1%
Citigroup  43,800 11,600 26.5% 8.5%
Bank of America Corp.  17,200 4,500 26.2% 8.8%
Air Products & Chemicals  5,894 1,466 24.9% 10.1%
Northern Trust  1,100 255 23.2% 11.8%
J.P. Morgan Chase & Co.  31,100 7,000 22.5% 12.5%
Ameriprise Financial  180 40 22.2% 12.8%
State Street Corp.  4,200 876 20.9% 14.1%
Kraft Foods Group  578 118 20.4% 14.6%
Bank of New York Mellon Corp.  6,000 1,200 20.0% 15.0%
Walt Disney  1,900 377 19.8% 15.2%
Lockheed Martin  291 55 18.9% 16.1%
Goldman Sachs Group  24,880 4,660 18.7% 16.3%
Graham Holdings  58 11 18.3% 16.7%
Viacom  2,500 438 17.5% 17.5%
Tenneco  737 121 16.4% 18.6%
Sherwin-Williams  4 1 14.6% 20.4%
Gap  581 72 12.4% 22.6%
Cigna  1,800 218 12.1% 22.9%
Morgan Stanley  7,364 841 11.4% 23.6%
Murphy Oil  6,045 684 11.3% 23.7%
Caesars Entertainment  118 13 11.0% 24.0%
Paccar  4,100 400 9.8% 25.2%
Anixter International  679 52 7.6% 27.4%
Laboratory Corp. of America  30 2 6.4% 28.6%
W.R. Berkley  58 3 5.3% 29.7%
Ford Motor  4,300 200 4.7% 30.3%
PPG Industries  5,000 200 4.0% 31.0%
Rock-Tenn  240 9 3.7% 31.3%
Timken  487 10 2.1% 32.9%
Occidental Petroleum  9,900 140 1.4% 33.6%
Assurant  163 1 0.6% 34.4%
TOTAL   $ 590,926  $ 169,412 28.7% 6.3%
Source: CTJ analysis of companies' 10-Ks  
57 Companies That Disclose Likely Tax Payments from Repatriation  
  Unrepatriated Income $ Millions Estimated    
  Tax Bill Implied Implied Foreign
Company Name $Millions Tax Rate Tax Rate
Hertz Global Holdings   $ 475  $ 184 38.7% 0.0%
Owens Corning  1,400 511 36.5% 0.0%
Safeway  180 65 36.1% 0.0%
Amgen  29,300 10,500 35.8% 0.0%
Qualcomm  25,700 9,100 35.4% 0.0%
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