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A Corporate Offshore Profits Transition Tax

57 Pages Posted: 14 Nov 2012 Last revised: 3 Feb 2013

Susan C. Morse

University of Texas at Austin - School of Law

Date Written: January 23, 2013

Abstract

Congress might repeal the residual U.S. tax imposed when non-U.S. subsidiaries repatriate earnings to U.S. parent corporations. Repeal would raise the transition issue of how to tax the $1 trillion to $2 trillion of offshore earnings held by such non-U.S. subsidiaries. This article proposes a 5%-10% corporate offshore profits transition tax on non-U.S. subsidiaries' untaxed earnings and profits, without downward adjustment for a foreign tax credit. It suggests using the financial accounting measure of unremitted earnings to help determine pre-1987 earnings and police aggressive efforts to reduce the earnings and profits base. The article’s policy analysis is based on the metrics of efficiency, administrability and equity.

Keywords: transition tax, territoriality, repatriation, unremitted earnings, permanently reinvested earnings

JEL Classification: K34

Suggested Citation

Morse, Susan C., A Corporate Offshore Profits Transition Tax (January 23, 2013). 91 N.C. L. Rev. 549 (2013); UC Hastings Research Paper No. 10. Available at SSRN: https://ssrn.com/abstract=2175353

Susan C. Morse (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

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