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US Firms Stashing $2.1t Overseas to Avoid Taxes
World Economy

US Firms Stashing $2.1t Overseas to Avoid Taxes

Eight of the biggest US technology companies added a combined $69 billion to their stockpiled offshore profits over the past year, even as some corporations in other industries felt pressure to bring cash back home.
Microsoft Corp., Apple Inc., Google Inc. and five other tech firms now account for more than a fifth of the $2.10 trillion in profits that US companies are holding overseas, according to a Bloomberg News review of the securities filings of 304 corporations. The total amount held outside the US by the companies was up 8 percent from the previous year, though 58 companies reported smaller stockpiles.
The money pileup, reflecting companies’ incentives to park profits in low-tax countries, has drawn the attention of President Barack Obama and US lawmakers, who see a chance to tap the funds for spending programs and to revamp the tax code. That effort is stalled in Washington, and there are few signs that tech companies will bring the profits back to the US until Congress gives them an incentive or a mandate.
“It just makes no sense to repatriate, pay a substantial tax on it,” said Joseph Kennedy, a senior fellow at the Information Technology and Innovation Foundation, a policy-research group whose board of directors includes executives from Microsoft and Oracle Corp. “Computing and IT companies especially have a lot of flexibility in where they declare their profits.”

  Apple, Google
Microsoft, Apple and Google each boosted their accumulated foreign profits by more than 20 percent over the year, the largest increases by any of the 34 companies with at least $16 billion outside the US International Business Machines Corp., Cisco Systems Inc., Oracle, Qualcomm Inc. and Hewlett-Packard Co. each added at least $4 billion.
The profits added by the eight technology companies accounted for 45 percent of the net gain in overseas funds among the corporations surveyed. At the same time, firms in some other industries felt enough pressure to meet domestic needs that they chose to take the tax hit by bringing money home.
Duke Energy Corp., based in Charlotte, North Carolina, took a $373 million tax charge against earnings in February as part of a plan to get access to $2.7 billion in accumulated foreign profits. Stryker Corp., a Kalamazoo, Michigan-based maker of medical devices, is planning to repatriate $2 billion this year.
Apache Corp., a Houston-based oil and gas company, had $17 billion indefinitely reinvested overseas at the end of 2013. Now, it has none.
“The company made the decision to utilize international cash to pay down US debt and grow its North American operations,” Castlen Kennedy, a spokeswoman, said in an e-mail.
  GE Leads
General Electric Co. topped the list for the fifth straight year. The company now has $119 billion outside the US, an increase of 8 percent from the end of 2013 and a 27 percent gain since 2010.
By contrast, Microsoft has more than tripled its offshore holdings since 2010. Apple, which counts only part of its non-US holdings as indefinitely held offshore, increased that portion to $69.7 billion from $12.3 billion in 2010. Cisco now has $52.7 billion outside the US, up 10 percent since 2013.
Microsoft referred back to 2012 Senate testimony by Bill Sample, its vice president for worldwide tax. Sample said then that the Redmond, Washington-based company is “fundamentally a global business” and that U.S. law creates a disincentive for U.S. investment.
Kristin Huguet, a spokeswoman for Cupertino, California-based Apple, declined an interview request.
It’s a measure of accumulated profits, including those reinvested in active businesses and factories. The companies say they won’t repatriate these profits, and they haven’t assumed that they will pay future US taxes that would be owed if they did.

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