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U.S. Puts Put the Welcome Mat For Overseas Earnings

Finance executives already bedeviled by the requirements of Sarbanes-Oxley's Section 404 saw their to-do lists get even longer in October, when Congress passed the America ...

By Susan Kelly | Updated on January 03, 2005

Finance executives already bedeviled by the requirements of Sarbanes-Oxley’s Section 404 saw their to-do lists get even longer in October, when Congress passed the America Jobs Creation Act. One of the biggest challenges near-term is the law’s repatriation provision, which gives companies a way to bring earnings back from overseas at a much lower tax rate than usual. But it’s a one-time opportunity, and companies that think they could benefit need to start planning now.

The U.S. usually levies a 35% tax on earnings that companies repatriate, although companies get a credit for any foreign taxes paid on the money. The new law lets them bring money back at a 5.25% rate, in either the tax year in which the law was enacted or the following tax year, provided that the money is invested in the U.S. But there’s considerable analysis that companies need to do, looking at not only the tax consequences but the financial consequences of bringing the money back and making the investment in the U.S. And the work will involve not only the tax and finance groups, but treasury, operations and human resources, consultants say.

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