A lobbying coalition seeking a tax holiday for repatriating offshore profits ended its campaign amid bipartisan congressional reluctance after spending more than a year and $760,000 on the effort.
The Win America Campaign, which included Cisco Systems Inc., Microsoft Corp. and Apple Inc., ended its relationship with two of its three lobbying firms in March, according to forms filed with the U.S. Senate last week. The coalition “temporarily suspended” lobbying on the issue, said Jennifer Dunn, a spokeswoman for Cisco. The company still considers repatriation and a tax-code overhaul to be top priorities, she said.
“We believe both are critical to leveling the playing field for American businesses as they compete overseas and to creating a boost for the U.S. economy,” Dunn said in a statement yesterday.
The technology-heavy group of multinational corporations that backed the repatriation holiday tried to use its lobbying muscle and support from lawmakers in both parties to win a tax break. The effort fizzled as some Republicans focused on permanent tax policy and Democrats warned of the potential revenue loss.
The group wanted Congress to reprise a 2004 tax holiday that let companies bring home offshore profits at a discount. Critics, including the Obama administration, said the proposal would cost the government money, encourage companies to move profits offshore and undermine efforts to overhaul the U.S. tax code.
Prospects for the legislation weren’t promising, contributing to the group’s decision to end operations, said a lobbyist who worked on the effort and wouldn’t discuss the decision publicly.
At one point last year, the repatriation effort looked “unstoppable” in Congress, said Steve Wamhoff, legislative director of Citizens for Tax Justice, a Washington group that opposed the proposal.
“This is a great sign for anyone who cares about tax fairness,” he said. “A lot of people have figured out that this is a proposal that really would offer the greatest benefits to some of the worst abusers of the corporate tax system, the companies that are really shifting their profits to tax havens.”
Doug Thornell, who had been a spokesman for the campaign, declined to comment.
Under current law, companies can defer U.S. taxation of profits earned outside the country until they bring the money back. Then, they must pay corporate taxes of as much as 35 percent minus tax credits for payments to foreign governments.
U.S. companies have stockpiled more than $1 trillion in untaxed profits outside the country. Seventy companies with the most money outside the U.S. held a total of $1.2 trillion overseas, according to data compiled by Bloomberg last month. Those companies increased their offshore holdings by 18.4 percent over the past year.
Other companies involved in the effort included Duke Energy Corp., Google Inc. and Pfizer Inc.
The companies maintain that a repatriation holiday -- like one enacted in 2004 that allowed profits to return to the U.S. at a 5.25 percent tax rate -- would inject money into the U.S. economy. Representative Kevin Brady, a Texas Republican, sponsored a bill that would have repeated the 2004 holiday.
The Joint Committee on Taxation, the nonpartisan scorekeeper of tax bills for Congress, estimated that the repatriation proposal would cost the government $78.7 billion in tax revenue over a decade, because companies would stockpile profits outside the U.S. in anticipation of another tax holiday.
The repatriation effort ran into resistance in part because the money held outside the U.S. was seen in Congress as a way to help finance an overhaul of the tax code, the lobbyist said.
Dave Camp, chairman of the House Ways and Means Committee, proposed an overhaul of the international tax system that would end most taxation of overseas profits. It would require companies to pay taxes on their untaxed offshore balances as if they were brought home and taxed at a 5.25 percent rate.
Camp, a Michigan Republican, didn’t endorse a stand-alone repatriation holiday bill.
Brady and others tried to insert a tax holiday proposal in a measure extending the payroll tax cut at the end of 2011. House Republican leaders chose not to include it.
The bill is H.R. 1834.