How Apple will win (and lose) under President Trump’s tax cuts

“The Republican tax bill now awaiting President Trump’s signature has two major pieces of good news for America’s most valuable company, Apple: It cuts the corporate income tax to 21 percent, and creates a cash repatriation holiday, allowing the company to bring tens of billions of dollars stashed overseas back into the U.S. under a lower rate,” Luke Stangel reports for The Silicon Valley Business Journal.

“But a key provision in the tax bill challenges Apple’s longstanding practice of holding intellectual property in foreign subsidiaries, a decision the company has relied on for decades to reduce its overall corporate tax rate,” Stangel reports. “And, it appears Republicans didn’t design an easy way for Apple to transfer that intellectual property back to Cupertino.”

MacDailyNews Note: See: Apple notches big league win with U.S. Republican tax cuts, but faces snag with taxes on foreign patents – December 21, 2017

“For years, Apple CEO Tim Cook has lobbied federal lawmakers to reduce taxes across the board, particularly on the more than $250 billion in cash the company holds in its foreign subsidiaries. Under the Republican tax plan, Apple would pay a one-time tax of 15.5 percent to repatriate its cash reserves. After that, companies would pay taxes of at least 10.5 percent on repatriated cash, but would be able to deduct foreign taxes already paid on the money, effectively lowering the repatriation rate to zero,” Stangel reports. “Going forward, reducing the national corporate tax rate from 35 percent to 21 percent will also help Apple’s bottom line.”

MacDailyNews Note:

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

Read more in the full article here.

MacDailyNews Take: There needs to be a way for companies to bring internationally-held patents back into the U.S. without exorbitant taxation, if lawmakers desire to disincentivize companies from holding patents overseas.

Apple notches big league win with U.S. Republican tax cuts, but faces snag with taxes on foreign patents – December 21, 2017
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


    1. There is another problem 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 Puerto Ricans can’t vote (until they are forced to move to Florida and start deciding elections in that state).

  1. How would you feel about paying a few $Billion to transfer property you owned from Europe to the United States?

    Our system of taxing production forces tax law to be complex. It has been no different with previous tax law revisions. Tax complexity is eliminated by abandoning production taxation and adopting consumption taxation, it is how our trading partners are able to maintain low income taxes. They call many names, but it is most commonly known as VAT (Value Added Tax) and is paid at the point of sale.

    Now that this issue has become known Congress will fix it, just don’t expect a fix until Congress returns in January.

    1. Just for clarity, the tax is due whether the property is transferred or not. If you are a US corporate taxpayer and own property overseas, the property itself (and not the income) will be taxed at 15.5% unless it is a fixed asset like real estate, in which case it will be taxed at 8%. Once the taxes are paid, you can transfer it to the US or leave it in Europe. Your choice. There is no actual inducement in this bill to bring any of that money back to the US or to invest it in infrastructure or wages if it is repatriated.

  2. It would be most agreeable if Apple paid the taxes it owes to the various nations where the sales were made rather than doing nefarious book transfers to avoid paying legitimate taxes. Doing evil.

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