“Multinationals are in line for a windfall from President Donald Trump’s call to cut the tax rate on U.S. companies’ stockpiled overseas earnings, but a select few would do better than others,” Lynnley Browning reports for Bloomberg. “Apple Inc. and Pfizer Inc. may enjoy an extra earnings bump because of their previous accounting maneuvers, while companies including Microsoft Corp., Merck & Co. Inc. and Exxon Mobil Corp. might have to log a one-time earnings hit, data recorded in their public filings suggest. The difference, which could mean a bookkeeping boost of as much as $7.9 billion for Apple and $5.3 billion for Pfizer, can be found on both companies’ balance sheets. Both have created multibillion-dollar ‘deferred tax liabilities’ to reflect the U.S. taxes they expect to owe on their accumulated offshore income.”
“Those liabilities are based on the current U.S. corporate income tax rate of 35 percent — but Trump and congressional Republicans have proposed slashing the rate on accumulated foreign earnings to just 10 percent or lower,” Browning reports. “If they succeed, Apple and Pfizer would be able to pay their lower-than-anticipated tax bills and then adjust their balance sheets, with one-time additions to their earnings worth billions, tax experts say.”
“A few companies choose not to label large amounts of their offshore earnings as permanently reinvested because they may need to tap that money in the future. In such cases, they have to book a deferred tax liability — as Apple and Pfizer have. The strategy that both companies used ‘now looks prescient,’ said Robert Willens, a tax and accounting expert in New York. ‘These companies, unlike most other multinationals, will see substantial benefits from the enactment of a deemed repatriation tax rule,'” Browning reports. “Apple Chief Executive Officer Tim Cook said during an exclusive interview with Bloomberg Television last week that he supports the deemed-repatriation approach…”
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MacDailyNews Take: Those who say Apple lacks a visionary have failed to account for CFO Luca Maestri.
SEE ALSO:
U.S. companies push Trump administration hard for lower tax rate on offshore profits – May 15, 2017
The fact that Apple has to issue bonds is a reminder of why urgent U.S. tax reform is needed – May 12, 2017
Apple borrows billions while sitting on massive overseas cash mountain – May 10, 2017
Why Apple is investing $148 billion in corporate debt – May 4, 2017
President Trump’s tax reform plan includes deep cuts in corporate taxes – April 26, 2017
Apple raises $10 billion in debt ahead of President Trump’s repatriation tax plans – February 3, 2017
After Apple’s blowout earnings, the Street looks toward ‘iPhone X’ and President Trump’s tax reforms – February 3, 2017
President-elect Trump’s corporate tax reform expected to have some positive impact on Apple EPS – January 14, 2017
Apple has now amassed nearly $80 billion in debt – September 12, 2016
