Tax Strategies for Foreign Earnings


Originally published in Industry Today

By Kurt Piwko

The headline-grabbing change brought about by the Tax Cuts and Jobs Act enacted at the end of 2017 was easy enough to grasp. The idea was that by offering U.S. companies a one-off, reduced tax rate of 15.5 percent, C corporations would have an incentive to bring home the more than $2 trillion in untaxed profits accumulated abroad. The offshore stash would otherwise have been taxed at 35 percent upon repatriation.

In exchange for that, put simply, companies got to pay practically zero U.S. tax on their foreign subsidiaries’ profits going forward as part of the shift from a global corporate tax system to a territorial one. Data compiled by the U.S. Bureau of Economic Analysis show that $777 billion was repatriated in 2018 and the most recent data show that corporation repatriated more than $1 trillion since the new tax law was enacted. But that is far below the $4 trillion President Donald Trump predicted would be brought back because of the tax law overhaul.

On the one hand, the reforms brought some welcome clarity and a reasonable trade-off for many businesses. But on the other, the changes have introduced new layers of complexity into tax calculations that companies are only just beginning to come to grips with as they see the surprising results in their 2018 tax returns.

Read the full article at Industry Today

Kurt Piwko is a partner at Plante Moran’s National Tax Office.