House bill would tax offshore corporate profits at up to 12%

U.S. companies that have accumulated trillions of dollars of overseas earnings would be taxed on that stockpiled income at a rate as high as 12 percent under the tax-overhaul bill that House Republicans released Thursday.

The measure addresses a quirk of the U.S. corporate tax system that has allowed multinational companies to stockpile their foreign earnings offshore—beyond the reach of U.S. taxes.

Earnings that companies hold offshore as cash and cash equivalents would be taxed at 12 percent. Income invested in less liquid assets—including plants and equipment—would be taxed at 5 percent under the bill. Both taxes would be mandatory, not optional, but companies would have as long as eight years to make their payments.

U.S. companies have stockpiled as much as $3.1 trillion offshore, according to an estimate by Goldman Sachs in a recent research note. Under current law, the U.S. taxes multinationals on their global earnings, but allows them to defer taxes on foreign earnings until they bring them back to the U.S., or “repatriate” them.

The “deemed repatriation” tax imposed by the bill would clear the way for many of those companies to bring their earnings back to the U.S.

Form 1120 for corporate taxes
Form 1120 Corporate Tax Return

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