[Senate Prints 112-27]
[From the U.S. Government Publishing Office]



112th Congress 
 1st Session                COMMITTEE PRINT                     S. Prt.
                                                                 112-27
_______________________________________________________________________

                                     




 
                      REPATRIATING OFFSHORE FUNDS:
                         2004 TAX WINDFALL FOR
                         SELECT MULTINATIONALS

                               __________

                         MAJORITY STAFF REPORT

                            prepared by the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON

                         HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

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                            OCTOBER 11, 2011

                  Available via http://www.fdsys.gov/



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas
                  Michael L. Alexander, Staff Director
               Nicholas A. Rossi, Minority Staff Director
                  Trina Driessnack Tyrer, Chief Clerk
                 Patricia R. Hogan, Publications Clerk
                                 ------                                

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                     CARL LEVIN, Michigan, Chairman
THOMAS R. CARPER, Delaware           TOM COBURN, Oklahoma
MARY L. LANDRIEU, Louisiana          SUSAN M. COLLINS, Maine
CLAIRE McCASKILL, Missouri           SCOTT P. BROWN, Massachusetts
JON TESTER, Montana                  JOHN McCAIN, Arizona
MARK BEGICH, Alaska                  RAND PAUL, Kentucky
            Elise J. Bean, Staff Director and Chief Counsel
            Robert L. Roach, Counsel and Chief Investigator
                       Allison F. Murphy, Counsel
                      Marcelle D. Johns, Detailee
                     Michael J. Martineau, Detailee
                     Mary D. Robertson, Chief Clerk


                            C O N T E N T S

                                 ------                                
                                                                   Page

                      REPATRIATING OFFSHORE FUNDS:
               2004 TAX WINDFALL FOR SELECT MULTINATIONS
                            October 11, 2011

I. EXECUTIVE SUMMARY.............................................     3

   A. Subcommittee Review........................................     3

   B. Report Findings............................................     4

     1. GU.S. Jobs Lost Rather Than Gained.......................     4
     2. GResearch and Development Expenditures Did Not Accelerate     4
     3. GStock Repurchases Increased After Repatriation..........     4
     4. GExecutive Compensation Increased After Repatriation.....     4
     5. GOnly a Narrow Sector of Multinationals Benefited........     5
     6. GMost Repatriated Funds Flowed from Tax Havens...........     5
     7. GOffshore Funds Increased After 2004 Repatriation........     5
     8. GMore than $2 Trillion in Cash Assets Now Held by U.S. 
  Corporations...................................................     5
     9. GRepatriation is a Failed Tax Policy.....................     5

   C. Report Recommendation......................................     5

II. BACKGROUND...................................................     6

   A. The U.S. International Tax System..........................     6

   B. American Jobs Creation Act of 2004.........................     7

   C. 2004 AJCA Repatriation Profile.............................     9

III. SUBCOMMITTEE REVIEW.........................................    10

   A. Results of the Subcommittee Survey.........................    11

     1. GU.S. Jobs...............................................    12
     2. GResearch and Development Expenditures...................    17
     3. GStock Repurchases.......................................    20
     4. GExecutive Compensation..................................    23
     5. GIndustry Sectors Benefiting from Repatriation...........    28
     6. GSource of Repatriated Funds.............................    30
     7. GCorporate Funds Held Offshore Post-Repatriation.........    33
     8. GCurrent Domestic Cash Assets............................    37
     9. G2004 Repatriation Did Not Achieve Intended Stimulus 
  Effect.........................................................    39

   B. Conclusion.................................................    41

IV. APPENDIX.....................................................    42

   Table 1--U.S. Employment......................................    42
   Table 2--Stock Repurchases....................................    43
   Table 3--Executive Compensation...............................    44
   Table 4--GDollar Value of Restricted Stock Awards for Five 
  Most Highly Compensated Executives at Surveyed Corporations....    45
   Table 5--Dividends from Tax Haven CFCs........................    54
   Table 6--Post-AJCA Accumulated Offshore Funds, 2006-2010......    55
   Table 7--Pre-AJCA Accumulated Offshore Funds, 2000-2004.......    56

                                ADDENDUM
                     OFFSHORE FUNDS LOCATED ONSHORE
                           December 14, 2011

I. EXECUTIVE SUMMARY.............................................    57

   A. Report Addendum Findings...................................    57

     1. GSurveyed Corporations Had $538 Billion in Undistributed 
  Accumulated Foreign Earnings...................................    57

     2. GAlmost Half of the Surveyed Corporations' Offshore Tax-
  Deferred Corporate Earnings Were Invested in U.S. Assets.......    57

   B. Report Addendum Recommendation.............................    58

II. BACKGROUND...................................................    58

III. SUBCOMMITTEE REVIEW.........................................    59

IV. CONCLUSION...................................................    63

                            REPORT EXHIBITS

   1. GExcerpt from ``Estimated Budget Effects of the Conference 
  Agreement for H.R. 4520, The American Jobs Creation Act of 
  2004,'' revenue chart prepared by the Joint Committee on 
  Taxation, October 7, 2004; and letter from the Joint Committee 
  on Taxation to The Honorable Lloyd Doggett, U.S. House of 
  Representatives, providing revenue estimates for two proposals 
  to modify Section 965 of the Internal Revenue Code, April 15, 
  2011...........................................................    65

   2. GExcerpt from Cisco System, Inc. Response To Permanent 
  Subcommittee on Investigations Survey, 2/18/09.................    80

   3. GExcerpt from Altria Group, Inc. Response To Permanent 
  Subcommittee on Investigations Survey, 2/18/10.................    81

   4. GExcerpt from Microsoft Corporation Response To Permanent 
  Subcommittee on Investigations Survey, 2/18/09; and Microsoft 
  Corporation FY06 Domestic Reinvestment Plan, May 25, 2006......    82

   5. GExcerpt from Oracle Corporation Response To Permanent 
  Subcommittee on Investigations Survey, 2/17/09; and Oracle 
  Corporation Section 965 Domestic Reinvestment Plan, May 27, 
  2005...........................................................    89

   6. GExcerpt from The Coca Cola Co. Response To Permanent 
  Subcommittee on Investigations Survey, 2/13/09.................    94

   7. GExcerpt from The Procter & Gamble Company Response To 
  Permanent Subcommittee on Investigations Survey, 2/26/09.......    95

   8. GExcerpt from Schering-Plough Corporation Response To 
  Permanent Subcommittee on Investigations Survey, 2/18/09.......    96

   9. GExcerpt from Johnson & Johnson Response To Permanent 
  Subcommittee on Investigations Survey, 2/24/09.................    97

  10. GOffshore tax dodging hurts U.S. business, Michigan Midland 
  Daily News, by Paul Egerman, small business entrepreneur, June 
  7, 2011........................................................    98

  11. GA Charlie Brown Congress?, The Hill, by Frank Knapp Jr., 
  president and CEO of The South Carolina Small Business Chamber 
  of Commerce, June 29, 2011.....................................   100

  12. GLetter to Congress: No Tax Holiday for U.S. 
  Multinationals, sent by 12 small business groups, June 14, 2011   102

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