The newly-passed Republican tax overhaul will allow Apple to repatriate its giant $252.3 billion overseas cash pile without paying as much tax as it would have previously.
Under the new rules, it would be able to take advantage of a one-off 15.5 percent tax rate, meaning it would owe around $39.1 billion — much of which Apple has already set aside for the purpose.
Apple could use its repatriated cash to pay off its $97 billion in long-term debt, the majority of which is being used to fund its dividend and share buy-back program.
An additional tax break on patents held in the United States will also lower the tax on licensing income from the standard corporate rate of 21 percent to 13.1 percent, which is much closer to the figure Apple pays on patents held abroad. This subject is important because where Apple’s patents and intellectual property are held is factored into its tax structures. As Reuters explains:
“In effect, the company attributes a large portion of the value of its products to patents and other intellectual property such as trademarks. Apple then assigns some of that IP, proportional to overseas sales, to subsidiaries in countries with low tax rates and assesses substantial patent royalties on sales. Those royalties then flow back to those low-tax locations, like Ireland.”
This clause was intended to make sure that intellectual property is held in the United States, and not determined by tax rates.
Finally, Apple will benefit from a corporate tax rate cut from 35 percent to 21 percent.
It’s not yet clear which of these tax amendments Apple will seek to take advantage of. Tim Cook has previously spoken about how he would like to bring Apple’s overseas money back to the U.S., but was dissuaded by the enormous bill it would face for doing so. In a December 2015 interview with 60 Minutes, Cook said that, “It would cost me 40 percent to bring it home, and I don’t think that’s a reasonable thing to do.”
While Apple hasn’t revealed how much, if any, cash it will repatriate for the one-time 15.5 percent tax break, it has reportedly set aside $36.3 billion for the purpose of paying tax. If the total bill comes to $39.1 billion, that suggests Apple could bring home almost all, or even all, the money.
