Comprehensive Corporate Tax Reform

Repatriation of Foreign Earnings
The nation’s recession is fueled in part by credit restraint and severe limits on liquidity. Many companies have significant financial assets overseas due to the high-tax cost of bringing those funds back (repatriation) to the U.S. These assets could be invested in restoring the economy at virtually no cost to the federal government. When a U.S. firm conducts its foreign business through a foreign-chartered subsidiary corporation, its overseas earnings are not subject to U.S. tax as long as the income remains in the hands of the foreign subsidiary and is thus reinvested abroad. The income is subject to tax only when it is ultimately brought back or “repatriated” to the U.S. parent corporation as dividends. Unfortunately, these earnings remain trapped overseas due to U.S. tax rates (in some cases 20-25%) that many foreign competitors do not face. This prevents employers from investing these revenues in U.S. operations and limits the ability to create jobs, build infrastructure and develop R&D. Existing profits earned by foreign subsidiaries of U.S. companies could be repatriated at a reduced tax rate and immediately injected to bring considerably more cash flow into the U.S. economy. Also, the increased flow of capital otherwise trapped overseas is otherwise unrealized tax revenue. We support the repatriation of foreign earnings as an incentive centerpiece to free up urgently needed capital.