Apple notches big league win with U.S. Republican tax cuts, but faces snag with taxes on foreign patents

“The U.S. Republican tax overhaul passed by Congress this week will allow Apple Inc. to bring back its $252.3 billion foreign cash pile without a major tax hit – a long-standing company goal,” Stephen Nellis reports for Reuters. “Other provisions of the bill, namely the cut in the corporate tax rate from 35 percent to 21 percent, are also a big boon for Apple.”

“But not everything went the company’s way. A critical difference between the Senate version of the bill and the final version could actually raise the amount of cash taxes that Apple pays on profits from patents held abroad, tax experts said. The treatment of foreign patent profits is important to Apple because shifting those profits overseas was a cornerstone of its tax practices for decades,” Nellis reports. “The bill has a pair of provisions designed to make that maneuver less alluring. One creates a minimum tax on foreign patent income that is expected to come to about 13 percent, said Gavin Ekins, a research economist with the Tax Foundation. At the same time, a tax break for patents held in the United States will lower the tax on licensing income from the standard corporate rate of 21 percent to 13.1 percent – about the same as if the patents were held abroad.”

“Congressional Republicans ‘don’t want the tax rate to be a consideration in where you put your intellectual property,’ Ekins said. ‘The whole intention (of the measures) is to bring back that intellectual property to the United States,'” Nellis reports. “But the final bill omits any explicit way for patents held overseas to be returned to the United States without being taxed… For those patents that remain overseas, the minimum tax on foreign patent profits means Apple might actually face higher cash taxes abroad.”

Read more in the full article here.

MacDailyNews Take: Surely Apple and/or Uncle Sam will figure something out regarding foreign patent repatriation.

Beyond the foreign patent issue, once President Trump signs the Tax Cuts and Jobs Act, Apple will have a one-time tax of 15.5% on their overseas cash. So, on $252.3 billion in overseas cash, Apple’s tax payment would total around $39.1 billion. Apple has already smartly set aside $36.3 billion just for that purpose.

Going forward, as Nellis notes, Apple will pay 21% on U.S. profits and a minimum 10.5% tax on foreign profits, “but they will be able to deduct foreign taxes already paid on those profits, so in many cases the foreign profits can be brought home with no additional U.S. taxes paid.”

Apple CEO Tim Cook and U.S. President Donald Trump at tech summit in June
Apple CEO Tim Cook and U.S. President Donald Trump at tech summit in June
Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth.Apple CEO Tim Cook, May 21, 2013

SEE ALSO:
Congressional Republicans deliver epic overhaul of U.S. tax laws to President Donald Trump – December 20, 2017
Republican-controlled U.S. Congress poised to approve biggest tax system overhaul in 30 years – December 19, 2017
GOP tax cut plan sets 15.5% repatriation rate on offshore cash; 8% if invested in plants and equipment – December 16, 2017
GOP eyes taking bigger bite from Apple, others holding cash overseas to seal President Trump’s tax cuts – December 15, 2017
Apple could be biggest beneficiary of Republican tax reform plans, saving at least $47 billion – December 6, 2017
Dow soars 203 points higher to record as Wall Street cheers U.S. Senate passage of major tax bill – December 4, 2017
Oracle joins Apple in support of President Trump’s tax repatriation plan – November 7, 2017
President Trump’s tax cuts could be YUGE for Apple – September 28, 2017
GOP tax plan calls for cutting the corporate tax rate from 35 percent to 20 percent – September 27, 2017
Goldman Sachs sees $1 trillion in U.S. tax cuts coming – September 20, 2017
Apple will eventually bring billions of dollars back to the U.S. under President Trump’s tax reform plan – July 21, 2017
President Trump’s tax reform plan includes deep cuts in corporate taxes – April 26, 2017
Apple could be primed for profit explosion under President Trump’s big tax cut – April 26, 2017

35 Comments

    1. David, has lost his poor little mind. Poor guy doesn’t yet grasp that the russians have been feeding him economic crap for years. Nor does this silly guy know what socialism is. He must be a complete fool to think history will not repeat itself. He doesn’t know that companies really want young workers for the most part. So when this bites him in the butt he will be 10 years older and nobody will want to hire him. Young workers why? Simple the cost less. Experience you have you say, so what, experience the will get, and the cycle will repeat.

      I watched some jackass political republican hack complain that under the ACA he paid 1000 dollars a month for 3 people to have insurance. Hell that is cheap as hell, for that obese son of a gun. Some people are paying 600 – 1200 without the ACA for individual coverage. Anyone that is thinking knows your plan depends on what coverage you want. But, and, if in the ACA how much money you make, if you smoke, your age. If you are young don’t think you will need much coverage buy a cheaper plan. But here’s the thing Bitch at your doctor and the hospital for wanting so much money from you. The republicans believe it is your responsibility to do so and that will lower cost. ( I guess you are to do that when your are hurting and needing the doctors help… The reason why the cost is so great is the doctors want a lot of money. Now they will tell you it’s not them, it’s all the government regulations that cost them so, so, so, much money, bull crap. Then they will tell you it’s the insurance companies that are charging them so much, oh that’s for sure. Wake up, insurance companies are profit centers, and the way to increase profits are to charge more, and pay out much less.

      The Republican lies continue, they must be lies, during the 90’s early 2000’s American business claim they were having a hell of a time competing with other companies around the world because they had to pay for employees’ health care. Ok, so short of nationalized health care the plan was to create a free and open market place, where insurance companies would go and place there plans on the shelf. The plans would cover certain things, but within a grouping those things would be the same. Why? Simple insurance companies had long ago figured out how to tell their customers they are not cover for that under that 100 dollar a month plan they were sold. So now the person has a high medical bill and is pissed that their insurance that they have been paying for all those many years ain’t worth a crap. Yeah, you see the need to be able to compare apples to apples right. So the MarketPlace was nothing more the a big box store were private insurance were free to go to sell to the public. Yes, like any store there were requirements to placement of their products. Certain things, illnesses, had to be covered if they put their product of the shelf. Now those companies were free to charge what ever, and you could compare and choose base on what ever.

      1000 dollar for 3 people that’s cheap, plus he must make a lot of money. The guy said his wife had to go out and get … he kind of stop himself there. … a job that had benefits cause he is to lazy and to cheap to do so. MAN! Look you never know when a train is going to fall on you, or a road is going to give away or in order to save 100 dollars your local water company will provide you will leaded water to drink, or any of a number of everyday happenings. Listen Just Don’t Be So Simple Minded. 1000 bonus not like having a raise in salary of say 5 dollars and hours. ok for the simple minded 5 *40 = 200, that’s a week, so 200 * 50= 10,000 for 50 weeks out of the year. good grief. stop cheering that chump change they are trying to hand when they are going to raise you health care contribution by 2500.

  1. Apple is borrowing money at a rate of 1+ percent. Why would Apple or any big corporation that could borrow money at a rate many times lower then the tax rate be willing to pay and move that money. That does not make sense.

      1. Exactly. They will be paying 15.5% on overseas liquid assets and 8% on illiquid assets like plants and equipment. Once the tax has been paid, they can leave the money abroad or repatriate it without further penalty.

        There is a further glitch with the patent tax. Quite a few US pharmaceutical and similar firms have built high-tech plants in Puerto Rico and hold the patents there. The island operates under a separate Federal tax code, so those patents are treated as “offshore” under the Trump Tax Reform and are subject to the new tax. That creates a major incentive for the firms to move their plants back to the mainland, further devastating the Puerto Rican economy.

        Congress was informed of the probable effect on the US citizens dependent on these plants, but chose to ignore it since those citizens can’t vote (until they are forced to move to Florida and start deciding elections in that state).

        I’m not sure if the “repatriation tax” that really isn’t (the 15.5 and 8% taxes on overseas assets) will also apply to assets in Puerto Rico, further kicking them while they are down.

          1. I would agree, but the new law allows American companies to not pay taxes on money made overseas. You tell me, if you can borrow money at one plus percent would you pay more than that to get cash you need to expand your business by bringing it from overseas and incur a tax liability of any type. This is what happens when there are no hearings and only a few lawmakers write a bill. You, unlike many others here know what this means. You know what direction companies and money will now go. If these guys, large corporations, wanted money to grow, they could have borrowed like Apple, got money in bonds at one plus percent or 2, or 3 still way under the 30 plus percent and still way under 15 or 8, incurred no tax liability. So bringing money back, not a big deal for large corps. not for any business use.. There must be another group, which could not borrow at those very low rates. Hmm. So yeah, the Cayman Islands will see an influx of cash once again.

            1. Clearly, one of us is not understanding the bill. I can see no way to not pay taxes on money earned overseas. There is a 15.5% Tax. If the profit is held in the form of a non-liquid asset like plants or equipment, that falls to 8%, which must be paid from the liquid assets. That tax is due whether Apple moves the post-tax profits home or leaves them in Europe.

              It doesn’t matter that Apple can issue debt for 1%. If it borrows to pay the tax, it still has to repay the principal and interest someday. Why would it do that when it already has a reserve fund that will cover at least $33BB of the $37BB liability?

    1. Overall Principle to which BOB Ascribes: what’s in another person’s back pocket belongs to me, to everyone, and needs to be distributed as prescribed by external forces/bodies.

      1). who said and why is a business responsible for someone’s healthcare, absolutely? Just b/c it’s been a historical practice, doesn’t mean it’s proper…or to be assumed.

      2). businesses should hire the weak, the old, the tired, the uneducated, the slow, the felons…etc, because, although their skills and abilities are likely to be a mismatch to the company’s goals, in fact, will likely be a drain/cost, “(at some point) you have made too much $$” and you’re required give “to each according to his means,” which is an admirable underlying credo to make our mandate.

      3). Life is hard and you need to make it easier for me through laws/mandates. Well, we’re back to the other person’s back pocket again.

      All the specifics/differences related to the tax plan, health care, safety nets, etc., need discussion, but the real issue is to clarify, admit to, discuss—IF we are the land of the Free–is the Socialist/Marxist mindset, yes BOB, Socialist mindset, that what’s in your neighbor’s pocket–those rich, elitist, having made too much $$, (smart, entrepreneurial, sacrificing, savvy, responsible, professionals) selfish, money grubbing corporatists–to be managed/owned by others, that don’t own the pants?

      Please don’t reply with “but, we need to help others & be charitable.” Of course we do…it’s the way in which it happens best.

      1. Now what are you talking about. A market, a store, where private insurance companies are to place on the shelves plans that the public can see and ready compare. Come on, you can tell us, you’re in the insurance business right? As in any store in America, though you may not know it, there are terms which the store owner may demand of someone, or business, that wants shelf space to sell a product must meet. The American Way Baby. So, the MarketPlace is just such a store and that’s all it is. The prices high, low, or just right are decided on by the venders, the private insurance companies.

        Now for those of you that think this is a redistribution of your income by the government you are wrong, It is being redistributed by the insurance companies from your pocket to theirs. For some reason you think that does not happen without the ACA. Why? Those that have insurance will pay for those that do not, always, It happened before the ACA.

        You must live in a mythological world. You will pay. The question is about benefit. Do you get a better benefit if everyone has insurance or do you get a better benefit if only those who can afford high premiums have insurance. Remember the premium is high because you have to make up that difference for those that don’t have. Hey take it up with the hospitals.

        You’ll figure it out after you first cancer scare, or that quadruple by-pass. Or when the insurer says your child can’t have that procedure cause it’s not cover because … and the doctor is telling you this is what must happen. You’ll get it then I guess.

      2. 1. The companies themselves did when they decided that healthcare would constitute a significant part of professional compensation … while leaving low level workers to shop for health insurance on their own.

        2. Notwithstanding your condescension (you seem to think anyone with a disability should be sent to institutions run by churches or something?), the only unproductive people are the ones who are forced like a square peg into a round hole to do the unfulfilling dead end menial scummy jobs for hellish bosses, invisible people that the investor class loves to call lazy while they rake in money often doing nothing but financial speculation. It must be very ego boosting to be born rich, sent to premier schools, and handed generous benefits by your ancestors. The vast majority of the planet, and an increasingly large percentage of Americans, are starting off in poverty and no amount of work ethic is going to make them worth anything in your jaded eyes.

        3. Nice slander there, let’s paste the socialist label. All modern economies are mixed. If you want a purely libertarian economy, then disband the military immediately. Your individual freedom can be taken away tomorrow by an orange haired idiot with nuclear warheads tanks and bombers. In the real world, nobody in the military works on behalf of your freedom. If they were intended for your defense, they wouldn’t be running missions in Nigeria, would they? The us government is controlled by the corporations who wrote this tax legislation. The ones who will benefit over the long term are not individual taxpayers, but the corporations who now have ever more cash to consolidate, merge, and screw customers. Watch your ATT bill next year. Watch as your choices in many areas dwindle into duopolies. Watch as executives… the hardest working smartest people in the world according to the brainwashed alt right… Give themselves unprecedented bonuses.

        Why hire people, which we already established to be too worthless for employing? Elites need to take care of themselves first, right?

        Funny how when corporate welfare is implemented under one corrupt party, you call it socialism. When your party digs a debt hole in order to give oligarchs more power, you call it liberty.

        I don’t give a shit what the short term bump this welfare is going to do for the US economy. The rich will pocket most of it, and the hangover is going to be epic. ICal that.

        Oh wait, you all don’t care if the economy implodes, as long as it happens on the other party’s watch. Dubya couldn’t have timed it better. Cause you know 60 years of accumulated debt spending is all Obama’s fault. Trump, the one and only saviour of the pure American race, is saving you by adding at least $1.5 trillion to the national credit card. Good thing they rushed this through before xmas, we can’t wait to rack up more debt. Can’t take the time to craft real reform removing spending and tax loopholes first. That isn’t the alt right way.

  2. Bob, you must have alot of time to type a mile-long postt and not really say anything. It’s wasting our time. Meanwhile, 9 trillion increased national debt the last 8 yrs under the dems. Now GDP growth is almost 4%. Go ahead and ignore a trillion in repatration.
    Ignore market confidence, and ignore less money taken out of your check. Ignore the fact that to give 20 million 20yr.olds insurance who didnt even want it, the dems had to rape the incomes of the working middle class to redistribute and pay for it. Your post was not facts, just abunch of extended hogwash. You’ve got the credibility of Rosie O’donnel.

    1. That may just be a knee-jerk reaction to a post by somebody who does not seem to be writing in American English. After recent experiences, we are all a bit leery of foreign trolling.

  3. Apple notches another big win with tax cuts. On top of their other big win on cheap foreign almost slave labor. Then the other big win in paying nearly “0” foreign tax rate. All the while as they charge their consumers $800 for an iPhone that cost them $220 to make.

    1. cheap foreign labor…I’d say this is good, no? Instead, let’s make a request during the upcoming earnings report, that Apple get out of the “cheap labor category” and see how the “medium level” labor costs feel? Or, should we consider that millions of Chinese CHOOSE to migrate to the factories and see it as a way upward? Slave, or let’s call it, “illegal” labor is something that Apple scorns and takes material steps to keep work humane.
      Going from the highest corp tax rate to a more modest level…at 21%, is hardly “nearly- 0.” Can I send you a new abacus…I think it might help and you might like pushing the beads around?

      And, for all things money-grubbing, Apple makes the highest profit margin in the mobile phone market! Again, this deserves making another request during the upcoming conference call. We could do it a couple of different ways…maybe suggest “B level technology” be incorporated into the future iPhs, or introduce sloppier manufacturing practices to compromise performance so customers are prompted to pay less? Or, maybe more simply, let’s demand–with some emphatic whining, that the items cost too much and instead of 38% profit margin, Apple should budget for 37% instead? It’s hard for me to pick the number that’s apperopos, as asking AAPL to NOT maximize profit is awkward for me.
      Another option, but tricker, because it opens a Pandora’s Box, Apple should develop a marketing plan that would enlighten the public to the truth of the matter…as we see it. I like; “We’re Here To Make You Buy Things You Can’t Afford or Don’t Want.” Or, “Paying More For Products That Provide Greatest Customer Satisfaction is Over-Rated”. I could go on, but you get the point.
      I know we’re Apple focused now, but we could work together to get the other snooty companies to lower their prices so we all could buy at prices that suit us. Profiting is so evil and I hate when they make us buy their products.

  4. “…not really say anything”, that is not true. You left that out. The fact that it was true, very important.

    Ok, fine, 20 year olds don’t want insurance, but you are an old butt, and you know that 20 year olds, get sick, get hurt, develop cancers, develop bone diseases, get pregnant, get venereal diseases, get in fights, do drugs, binge drink, have yeast infections and more, or, or is it that they have some protective shield around them until age 30 something… What the hell are you talking about. But even so, until age 26 they could stay on their parents insurance, so 4 years to go iStepChild… and certainly nothing ever health related happens between 26 and 30…

    So. if i understand you correctly, Americans should pay for these 20 year old grown people, when they get hurt, injured, develop a cancer, get a social disease, get pregnant etc. through older people who have insurance paying more on their premiums. Ah I see. Interesting.

    I would rather not do that, Thank-you.

  5. Apple should sleep soundly for the rest of 2017 as the CHIP program which aids poor children with healthcare has pasted its deadline.

    The GOP was so busy giving the rich their just desert it allowed the Sept 30 2017 deadline to to pass without extending funding for the CHIP program. Many states will have reserves to last until Jan 2018 though for some states their funds will be exhausted by the end of December 2017.

    What is it the rich call the poor, oh yea, the takers.

    What is it Jesus called the poor…….

    1. Try to keep up, okay?

      The U.S. House is expected to vote Thursday on a short-term spending bill to fund the government through Jan. 19.

      The bill unveiled by GOP lawmakers Thursday morning contains $2.85 billion for the popular Children’s Health Insurance Program (CHIP) and $750 million for diabetes programs and community health centers.

      A “pay-go” waiver, language that would allow President Donald Trump to immediately sign the tax bill Republicans’ passed Thursday, is also included. Without such a waiver, Trump would likely have to wait two more weeks and sign the tax bill in January.

    2. to “support” his arguments. Btw, I’m not talking about the person erroneously positioned in his last sentence.
      Make a real case BJ instead of flailing with empty wordiness.
      Let me assist, please. I’d just go ahead and state; “R’s are ok if people die or live in pain as long as they get rich.” Does that work for you?

  6. So, do any of you think all those AT&T employees that voted for Bernie or Hilary will give back that $1K bonus now? Or maybe they will give it to charity or to the political party they support?

    What do you think.

    1. I think as long as it’s unelected oligarchs distributing benefits, the alt right is all for it. If instead of token one time bonuses when they are handed regulatory windfalls, these multinational corporations actually implemented profit sharing plans that rewarded all employees (not just the executive boardroom), then we would not live in a society where Maseratis drive past beggars on the street, and where one accident or disease can trigger a financial spiral sending a family into permanent poverty.

      Excuse me for giving a shit about something besides money. The patchwork of charities isn’t adequate to resolve the issue of CEOs making 350 TIMES what his average professional employees make day in and day out. As average Americans become poorer, less healthy, and poorly educated compared to other nations and dramatically less well off compared to global elites, this must be what Trump considers Great Again. Lots of desperate cheap domestic labor?

      This bill will only make that obscene ratio worse.

      So glad you think $1k is adequate restitution for a rigged economy that just handed ATT everything on their lobbying list.

      Sorry, small companies. Us manufacturing, retailers, have some coal and watch what happens to your telecom bill next year. They will tell you that despite a yuuuuge tax break, you all have to pay more because 5 G is coming someday

  7. The huge insurance premium increase happened to the working “old butt” middle class because the Dems taxed their non-voting base to redistribute to their young voting base. They acted surprised when their base did’nt want it. Trump is in office today because Obamacare premiums raped working middle class incomes. They said on paper that Obamacare would not work. They were right! Now, let’s see if Tax Reform works? Will take awhile, but the Dow has been up 120 points today. What if it works, Bob? Who will you trash then.

  8. Observer; does it concern you what another does with their $$? Regardless of where/how a person receives a dollar, assuming legally, should a person/corp have conditions on how they spend/invest THEIR money? Yes, THEIR money, even if “granted” (returned actually) by those on the DC Thrones.

      1. and you, Observer, want to be in the position, or for some authority to determine how one spends/saves/invests/gives? I’ll answer it, I think you do because I don’t believe your question implies mere curiosity, but more-so, ascribing to the paradigm that culture is to be empowered to force the idea of “putting your money where your mouth is” on another?
        If true, from where does that impulse come and how do you justify it without acknowledging the marxist mindset? Being our brother’s keeper doesn’t mean we are to be our brother’s ruler?

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