The Lock-Out Effect of the U.S. Worldwide Tax System: An Evaluation of the Repatriation Tax Holiday

Posted: 15 Oct 2013 Last revised: 22 Oct 2013

See all articles by Roy Clemons

Roy Clemons

New Mexico State University

Michael Kinney

Texas A&M University - Department of Accounting

Date Written: August 22, 2011

Abstract

Recent theoretical research suggests that among U.S. firms that have reached their optimal level of investment in foreign operations some will be induced by the U.S. repatriation tax system to accumulate foreign earnings in foreign financial assets. In this paper we evaluate this behavior which the literature has dubbed the “lock-out effect.” The American Jobs Creation Act of 2004 that created a one-time tax holiday for repatriations provides a powerful setting to evaluate the lock-out effect. Using a hand-collected sample of firms that repatriated under the tax holiday, we find evidence strongly supporting the existence of a lock-out effect.

Keywords: lock-out effect, corporate tax, repatriation, jobs act, american jobs creation act

Suggested Citation

Clemons, Roy and Kinney, Michael R., The Lock-Out Effect of the U.S. Worldwide Tax System: An Evaluation of the Repatriation Tax Holiday (August 22, 2011). Tax Notes International, Vol. 63, No. 8, 2011. Available at SSRN: https://ssrn.com/abstract=2340523

Roy Clemons (Contact Author)

New Mexico State University ( email )

P.O. Box 30001
Las Cruces, NM 88003-8001
United States

Michael R. Kinney

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
United States
979-862-2078 (Phone)
979-845-0028 (Fax)

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