A tax holiday for big corporations may mean that some of them come back to the United States with their money. Even if corporations are headquartered in the U.S., they are not necessarily holding all of their money here. In fact, they are probably not holding their money here because it is expensive.
Unlike personal tax rules, corporations are able to keep their money in offshore accounts without having to pay taxes on it until they want to bring it back into the country. Many corporations take advantage of this because the U.S. has the second highest corporate tax rate in the world. However, it would be pretty cool if we could have that money here at home and in the revenue stream rather than sitting in an account guarded by gun-wielding guards and locks the size of a car. In order to incentivize bringing those bucks back into the States, some government figures have proposed a tax holiday, a period during which big companies can repatriate their money without having to pay the same high amounts of IRS taxes.
This idea has come up in conversations in what seems like a whisper, with the loudest whispers coming from Rep. Eric Cantor (R-VA) and Sen. Orrin Hatch (R-UT). However, it is not endorsed by Treasury Secretary Timothy Geithner.
However, big name companies like Apple, Microsoft, and Pfizer have been looking around for beneficial tax venues – i.e. countries with more lax tax policies like Ireland. Since the political climate in the U.S. and the financial climate in Ireland are shifting, some of these companies might be considering coming back home.
How do we know this? Well, last fall, Apple’s Steve Jobs said his company was waiting for “one or more unique strategic opportunities” before making the move. Apple, a traditionally politically cautious company, has also signed on with Fierce, Isakowitz and Blalock in Washington, DC., a lobbying firm that is rumored to plan to try to make the new leaders in Congress think about their financial and privacy concerns. Read: Apple wants to pay less taxes and will not bring their money back into this country until they can.
While tax reform is certainly under way, it is very unclear what is going to happen with both individual and corporate taxation. A lot of new and proposed policy focuses on getting back lost revenue and closing loopholes. Corporate taxation, though is a little more unclear, and corporations whose leverage might just stay in other countries seem to have different ideas about what is best for U.S. tax policy.