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Repatriation Tax Holiday: Companies Holding Nearly Half Of Untaxed Profits In The U.S. [UPDATE]

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First Posted: 12/15/2011 12:07 pm Updated: 12/15/2011 4:29 pm

Multinational corporations likely have the means to invest the offshore profits in the U.S. without a tax holiday that they're billing as a job creator.

More than 25 multinational companies holding nearly $540 billion in untaxed profits are maintaining 46 percent of that money in U.S. banks or assets, according to a recent survey commissioned by Senator Carl Levin (D-Mich.). The findings run counter to claims that corporations need a tax break on their offshore profits for it to make financial sense to bring the money back to the U.S. or that they need more money to invest.

In fact, corporations are sitting on $3.6 trillion in cash, according to a recent report from the University of Massachusetts -- a sum that would create 19 million jobs in the next 10 years.

(This story has been updated to include a statement from the WIN America campaign).

U.S. multinational corporations like Google and Microsoft, which were part of the survey, have been lobbying Congress for a so-called repatriation tax holiday, arguing that a tax break on offshore profits would incentivize firms to invest the money in the U.S., according to Bloomberg. The repatriation tax holiday is one of many ways that profitable companies are able to shrink their tax bills; thirty of America's most profitable companies paid a tax rate of less than zero in the last three years, according to a recent study.

"Some multinational corporations say they want to bring foreign funds back to America, but can do it only if they get a special tax break," Levin, who opposes a repatriation tax holiday, said in a statement. Adding that many multinational corporations are "taking full advantage of the safety and security of the U.S. financial system to protect their money while paying no U.S. taxes on those funds to support the U.S. system."

Officials at the WIN America Campaign, a coalition of companies advocating for a repatriation tax holiday, responded to Levin's study, arguing that just because multinational companies are holding some of their money in U.S. banks and other assets, that doesn't mean they're in a position to invest it directly in the U.S. economy.

"Even these U.S. deposits will eventually be spent overseas without a change in our tax laws," according to a WIN America statement. "Senator Levin's one-sided, partisan report does nothing but attempt to score rhetorical points while U.S. profits continue to be invested around the world instead of here at home due to a seriously flawed tax code."

The survey's findings support others indicating that corporations may have oversold the benefits of a repatriation tax holiday. A recent study published in the Journal of American Taxation Association found that a 2004 repatriation tax holiday mostly benefited companies that already had the means to invest and create jobs without the boost from the tax holiday.

A Treasury Department analysis had similar findings. Five U.S. firms received more than 25 percent of the benefits from the 2004 tax holiday and the companies that benefited the most from the tax holiday actually cut jobs from 2005 to 2006. Instead, many of the companies used the money to buy stock.

The Heritage Foundation, a conservative think tank, recently reversed its position on the repatriation tax holiday, arguing in an October paper that the tax break would do little to spur investment and job growth. In 2010, the organization claimed that cutting taxes on foreign profits would encourage companies to invest that money in the U.S.

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Filed by Jillian Berman  |