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.
Luke Dormehl is a U.K.-based journalist and author, with a background working in documentary film for Channel 4 and the BBC. He is the author of The Apple Revolution and The Formula: How Algorithms Solve All Our Problems … and Create More, both published by Penguin/Random House. His tech writing has also appeared in Wired, Fast Company, Techmeme and other publications.
18 responses to “New tax break could allow Apple to bring its overseas cash pile back to the U.S.”
It is *not* going to do so. Or at least, it will make token gestures because it, like almost all other companies, **do not pay 35%**. They have lawyers who guide accountants to loopholes and this is why Apple (among others) park their monies overseas. They are not going to pack up and “repatriate” that cash, especially now, as the deficit busting tax scam bill brings their liability to almost 0% it not flatlined. It will go to their shareholders or sent directly to business income. I have no doubt that Tim Cook, who had no problem meeting with that unfit, unqualified racist birther earlier this year, will make some noise about this, but it is not going to change their overall avoidance schemes one iota. And you will not see any price drop in Apple products because of it.
The average tax rate paid in 2016 by Fortune 1000 companies was 27.8%. United Health pays 40%, Home Depot 36%, McDonalds 33%, Disney 33%, Wal-Mart 31%. In fact, the largest single tax loophole these “lawyers and accountants” use is to stash money in tax havens (like Spain and Ireland). Notice that the company’s who make the majority of their money in the US pay well over 30%. So the combination of a 21% cap and repatriation makes it a level field for national and multinational’s and takes away the incentive to stash future earnings overseas. So, even if none of the cash currently overseas moves back there is no more incentive to move future earning overseas. Net and big win fo our economy.
Do you mean “corporate debt”, not “corporate debit”?
Average tax rate paid in the US of course. You are talking about tax evasion within your borders via deductibles. Apple is tax evading by stashing it in offshore accounts and earning it on tax haven books and thus wouldn’t this income would not even be counted as received it is still with other non-US shell companies?
The best examples you have here is your examples. United Health and Home Depot are both 99% US only businesses in heavily regulated industries, McDs which invests so much in foreign property I doubt it’s bringing back in much more than just wages for HQ staff (just like Apple), Disney who receive most of their cash through royalties (no loopholes in that biz look at all the musicians that get busted for tax evasion… Almost like Apple’s iTunes business, but without owning shopfronts and thus all the money is earned in the US when deposited because it’s transferred from a shopfront like iTunes, a US->US transfer) and Wal-Mart that again don’t report foreign income because they are held by externally investing companies and tax haven shells. Buying supermarkets in 20 countries around the world isn’t usually done from the same account you have registered at HQ for the IRS.
Why is it those that know the least, like you, spew the most. Try actually learning about these things instead of spreading soros fake info.
Taking advantage of tax law IS NOT a loophole. It’s intelligent. It’s tax code. You lose credibility with such bias. There are more ways this new tax law will benefit the US economy regardless of Apple products pricing. The market determines the price, not whether or not Apple want to be “nice” to it’s consumers. It’s called capitalism, and at days end, consumers benefit from it.
And Americans still don’t have universal healthcare, go figure.
In political terms universal healthcare is a philosophical divide. Tax is just another bill. Healthcare was Personal freedom/responsibility vs Government oversight/control. In healthcare, the two parties basic beliefs were at stake. The tax bill was just political posturing.
If these were normal political times and there was a President Biden or President Kasich this Tax bill would have passed with a super majority. Obama wanted corporate taxes at 26% so Dems and Reps settle at 23%. Dems wanted the boost on the individual and child tax credits since Ted Kennedy, done. Dems get interest carry-forward cut and Reps get the AMT cut and that’s 90% of the bill settled. But, instead Dem’s get nothing but the ability to say screw Trump. Good legislation involves compromise. Not good for the country.
Taking advantage of tax law IS NOT a loophole. It’s intelligent. It’s tax code. You lose credibility with such bias. There are more ways this new tax law will benefit the US economy regardless of Apple products pricing. The market determines the price, not whether or not Apple want to be “nice” to it’s consumers
They are going to need the extra cash for the thousands of law suits and to buy back the shares that investors are selling off in droves, why did not they just make a good battery set up and keep the good name they they had for innovation, but corporate greed got along with the predicted share prices drop the Apple reputation is not worth a J Arthur Rank, if a company made a product that the public liked and put on the box that the battery life was 2 years and no special tools or skills were needed to it and the battery was a fair price people would would stay with the product but the corporate execs could not do the right thing and now we have stories about we only did this for your own benifit, so what did they end up with the public know they can’t trust the company or the product, good luck with the share price and the pr campaign!
They are going to need the extra cash for the thousands of law suits and to buy back the shares that investors are selling off in droves, why did not they just make a good battery set up and keep the good name they they had for innovation, but corporate greed got along with the predicted share prices drop the Apple reputation is not worth a J Arthur Rank, if a company made a product that the public liked and put on the box that the battery life was 2 years and no special tools or skills were needed to it and the battery was a fair price people would would stay with the product but the corporate execs could not do the right thing and now we have stories about we only did this for your own benifit, so what did they end up with the public know they can’t trust the company or the product, good luck with the share price and the pr campaign!
If these were normal political times and there was a President Biden or President Kasich this Tax bill would have passed with a super majority. Obama wanted corporate taxes at 26% so Dems and Reps settle at 23%. Dems wanted the boost on the individual and child tax credits since Ted Kennedy, done. Dems get interest carry-forward cut and Reps get the AMT cut and that’s 90% of the bill settled
And Americans still don’t have universal healthcare, go figure.
Taking advantage of tax law IS NOT a loophole. It’s intelligent. It’s tax code. You lose credibility with such bias. There are more ways this new tax law will benefit the US economy regardless of Apple products pricing. The market determines the price, not whether or not Apple want to be “nice” to it’s consumers
Please explain why any company would repatriate profits at 12% to simply execute a buyback? First, you buyback when your stock is undervalued not at a high. Second, buybacks can be done by taking on debt at 4% not 12%. Third, why are buybacks bad? Do you have an IRA? Does your favorite charity have a investment fund? Do you want a college grant from an endowment? Do you work for company? Buybacks are simply another way invest YOUR profits in YOUR company because you believe in its future. That’s just another scare tactic the Dems use to get their uneducated base worked up.
They are going to need the extra cash for the thousands of law suits and to buy back the shares that investors are selling off in droves, why did not they just make a good battery set up and keep the good name they they had for innovation, but corporate greed got along with the predicted share prices drop the Apple reputation is not worth a J Arthur Rank, if a company made a product that the public liked and put on the box that the battery life was 2 years and no special tools or skills were needed to it and the battery was a fair price people would would stay with the product but the corporate execs could not do the right thing and now we have stories about we only did this for your own benifit, so what did they end up with the public know they can’t trust the company or the product, good luck with the share price and the pr campaign!
Taking advantage of tax law IS NOT a loophole. It’s intelligent. It’s tax code. You lose credibility with such bias. There are more ways this new tax law will benefit the US economy regardless of Apple products pricing. The market determines the price, not whether or not Apple want to be “nice” to it’s consumers