• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to secondary sidebar

Alston & Bird Tax Blog

  • Home
  • Services
  • Contacts

Unrepatriated Foreign Earnings

June 7, 2011 By Jasper L. (Jack) Cummings, Jr. and Edward Tanenbaum

Interest of the SEC in foreign earnings repatriation and its tax impact is not new. At least as early as 2008 the SEC inquired of Sun Hydraulics Corporation how it could project that it would or would not repatriate income and what the tax effect would be.

 

The SEC’s concerns include (1) risk of future tax liabilities upon repatriation, (2) lack of liquidity due to the tax penalty that inhibits repatriation, and (3) the compounding of the lack of liquidity when borrowing is required to supply for domestic use the cash that is being held off shore.

 

The SEC’s concern seems to have increased in the last year, as evidenced by a particularly detailed inquiry to Microsoft in a letter dated Feb. 10, 2011. The letter notes (1) the huge and growing proportion of Microsoft’s income that is foreign, (2) the substantial difference between Microsoft’s foreign tax rates and the U.S. nominal tax rate, and (3) the liquidity impact of holding the earnings offshore. It asked for disclosure of “how income tax planning has historically impacted or is reasonably likely to impact future results of operations and financial position.”

 

The SEC letter to Microsoft is the only one to reference a 1992 SEC Release No. 34-30532, which asked Caterpillar, Inc. about unrepatriated Brazilian earnings.

 

An April 6, 2011 letter to the SEC from Microsoft explained that most of the foreign earnings was invested in U.S. Treasury debt and also explained why Microsoft borrowed money will it was holding vast amounts offshore (well actually onshore, in the hands of the Treasury).

 

This pattern of SEC inquiry illustrates that the issue of unrepatriated foreign earnings is not solely one of federal taxation but also of securities reporting and disclosure.

 

Filed Under: Accounting, Corporate - Federal, International - Outbound

About Jasper L. (Jack) Cummings, Jr.

Jack Cummings is counsel in the Federal Tax Group of Alston & Bird in Raleigh and Washington, D.C. He served as IRS associate chief counsel (corporate) and chair of the Corporate Tax Committee of the ABA Section of Taxation.

[Read Bio]

About Edward Tanenbaum

Edward Tanenbaum is co-chair of the firm’s Federal & International Tax Group and a member of the firm’s Global Resources & Strategies Committee. Mr. Tanenbaum’s practice consists primarily of planning and structuring tax efficient solutions for cross-border business transactions and investments by foreign multinational corporations and high-net-worth individuals.

[Read Bio]

Primary Sidebar

As a service of Alston & Bird’s Tax groups, this blog focuses on current issues and events in international, federal, state and local tax and wealth planning of interest to business.

Subscribe

Receive email notifications when new posts are added.

Check your inbox or spam folder to confirm your subscription.

Tags

401(k) ACA Affordable Care Act audit BEAT CARES Act CFC Corporate Tax Planning covid-19 Delaware ERISA Escheat FATCA FDII Gift cards GILTI international tax IRA IRAs IRS Kelmar New York nexus OECD qualified plans Quill RUUPA SCOTUS Section 351 Section 355 Section 367 Section 385 section 482 section 965 State legislation Subpart F Supreme Court Tax Court Tax Cuts and Jobs Act tax reform TCJA Treasury Unclaimed property UP Wayfair

Secondary Sidebar

Categories

Recent Posts

  • Litigate, Legislate and Repeat: The Delaware Escheat Law Spin Cycle
  • Looking Back at Georgia’s 2022 Legislative Session
  • Diving into IRS’s Annual Report on Advance Pricing Agreements: Can APMA Overcome Its Sisyphean Task?
  • California Dreaming of a Voluntary Compliance Program
  • Testing for COVID and Your Kits for Free: Expanded Coverage of OTC COVID-19 Test Kits and Developments in Preventive Care

Archives

Copyright © 2022 · Alston & Bird · All Rights Reserved. Privacy.