Apple's $102 billion in "offshore" profits is actually sitting in Manhattan — but the IRS can't touch it.
U.S. corporations are increasingly stashing cash overseas. Nearly a dozen major companies are thought to be hoarding more than $40 billion each beyond the reach of Uncle Sam.
But much of it might not be overseas at all, The New York Times says. Take Apple as an example:
Apple’s $102 billion in offshore profits is actually managed by one of its wholly owned subsidiaries in Reno, Nev., according to the Senate report on the company’s tax avoidance. The money is tracked by Apple company bookkeepers in Austin, Texas. What’s more, the funds are held in bank accounts in New York.
Technically, the money belongs to an Irish subsidiary of Apple. Many companies use this strategy, including Microsoft, Hewlett-Packard and Google, the Times says.
Apple, which may have as much as $137 billion in cash reserves, chose to take on $17 billion in debt last month to pay shareholder dividends rather than tap the “offshore” funds. CEO Tim Cook told Congress it would have been unfair to shareholders to use the cash since it would be taxed at 35 percent if brought “home.”
About 20 companies are lobbying Congress for a tax holiday, when they could bring their reserves home at a reduced tax rate. They argue it would create jobs and encourage investment.
We’ve tried that before and it didn’t work. In 2004, American companies brought home more than $300 billion at a 5.25 percent rate, “but it led to no discernible increase in American investment or hiring,” the Times says.