Our federal government is totally complicit in allowing corporations to shelter trillions of dollars overseas. What would be the reason? Look no further than Section 956(c)(2) of the IRS tax code which has been in place since 1962. But, why? This code allows corporations to repatriate these overseas funds back to the U.S. tax free if they purchase Treasury securities and/or corporate bonds or stocks. In other words, these overseas funds, $2.6 trillion plus, is and has been an excellent way for our federal government to finance its federal deficits. If a company decides to use these funds for any other purpose, like capital spending, it would be subject to the 35% corporate tax rate. Since 2012, the U.S. Treasury has paid at least $1.4 billion in tax-free interest to corporations utilizing Section 956 of the IRS code.
President-elect Trump promised to get companies to bring back some of the $2.6 trillion they hold internationally by enacting a one-time tax of 10% from the current 35%. But, if I am a CEO, why would I do that when I can still utilize Section 956 of the IRS code and not pay any taxes. What Trump should do is enact a one-time tax of 0% with the stimulation that those funds have to be used for capital spending projects in America.
For the full Bloomberg article, click-on this link.
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