The tax rates that U.S. companies would pay on an estimated $3.1 trillion in earnings they've stockpiled overseas haven't been finalized yet—and they may change depending on the final bill's revenue score, said Representative Tom Reed, a Republican member of the House Ways and Means Committee.
The House voted last month to tax companies' stockpiled offshore earnings at 14 percent for income held as cash and 7 percent for less-liquid assets. The Senate's bill this month set those rates at 14.5 percent and 7.5 percent, respectively.
As Republican leaders of the two chambers work on compromise legislation to send to Trump next week, many of the changes—including a lower rate for the highest-earning individuals and restoring or enhancing some tax deductions—would increase the bill's revenue cost.
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Both the Senate and House measures were estimated to reduce tax collections by more than $1.4 trillion over 10 years.
By delaying agreement on so-called "repatriation" rates for companies' foreign profits, lawmakers may be preserving a way to help cover any increased costs, according to Henrietta Treyz, a managing partner and director of economic policy at Veda Partners.
"Multinational corporations are maxed out and will start to sour on this tax bill if additional revenue is sought from their basket," Treyz wrote in a note to clients.
Under current law, companies can defer paying U.S. income taxes on their foreign earnings until they return, or "repatriate," them to the U.S. The deferral provision has led companies to stockpile those earnings overseas. Lawmakers, who plan to cut the corporate income tax rate to 21 percent, from 35 percent, intend to impose still lower rates on those accumulated earnings.
They also intend to introduce new taxes on certain types of foreign income in the future, while largely ending the deferral system and moving toward a "territorial" system that would focus on companies' domestic profits.
From: Bloomberg News
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