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U.S. lawmakers look to make it easier for companies to bring cash home

Published by Steve Coleman on August 03, 2011

By Birgit Matthiesen

Last May, a bipartisan group in the US House of Representatives introduced a measure that would allow U.S. firms to bring back overseas profits at a temporarily reduced tax rate for 2011 or 2012.

In the Senate, a tax reform bill introduced in April by Finance Committee member Ron Wyden, D-Ore., and Sen. Daniel Coats, R-Ind., included a repatriation holiday as a transition to their bill's reformed tax system.

These bills are at early legislative stages, but the proposal may gain traction in the weeks to come and, if passed, would have significant consequences for CME members.

As introduced, the Freedom to Invest Act (House bill 1834) would offer a temporary 5.25 percent rate on repatriated foreign dividends, but it also would address job creation concerns by levying a penalty on companies that fail to keep a statutorily defined ‘‘average employment level'' of full-time employees for 24 months after taking the temporary rate.

This is not a new idea. Congress enacted a similar holiday in 2004, and in recent months lawmakers have debated whether to introduce a similar effort. The White House is on record that a temporary tax holiday should be considered only as part of a broader tax reform effort.

Even if the bill guaranteed that repatriated funds were used for job creation and would not lose revenue, there appears to be little appetite for a stand-alone repatriation bill. House Majority Leader Eric Cantor, R-Va., supports the measure, but neither the Obama administration nor Ways and Means Committee Chair Dave Camp, R-Mich., does.

For their part, the US business community is of divided views. However, in recent weeks, President Obama's chairman of his Council on Jobs and Competitiveness, Jeffrey Immelt, CEO of GE, publicly endorsed a temporary tax holiday for repatriated corporate earnings and said it would lead to domestic jobs.

Immelt downplayed the momentum in Congress on repatriation holiday proposals.

‘‘Can it really be that good to have a trillion dollars in cash someplace other than the United States right now? The more time we sit with high unemployment, the more people are going to ask those questions,'' Immelt said. ‘‘Done the right way, repatriation will create jobs in the United States, and I truly believe that.''

He expressed support for an idea suggested by Senate Finance Committee member Charles E. Schumer, D-N.Y., to use taxes collected from the holiday to fund an infrastructure bank.
As of this writing, US industry sources tell us that the White House may reveal a tax proposal of some sort in the fall and could include a tax holiday proposal as a way to win business support.

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