Deferral and Repatriation: A Proposal to Encourage Repatriation of Offshore Income
ATA Journal of Legal Tax Research, Volume 11, Issue 2, August 2013, DOI: 10.2308/jltr-50596
16 Pages Posted: 17 Aug 2014
Date Written: 2013
The need for U.S. tax laws to encourage and reward repatriation of offshore income is stronger than ever. We propose an approach that will penalize retaining earnings overseas, while rewarding entities that undertake a repatriation policy. The reward structure requires an accountable use of the repatriated funds for designated investments that further the economic needs goals of the U.S. Under our proposal, an interest charge would be assessed on unrepatriated offshore profits and would be reduced as various remission targets are met. The dividends-received deduction on repatriated earnings would increase as various remission and usage targets are met. A clawback provision would require the taxpayer to repay tax benefits received if there is a subsequent failure to meet the usage targets. The potential difficulties of operationalizing our proposal are identified and considered. A combination of the strategies developed in this proposal, perhaps in concert with features of other proposals, would encourage participating corporations to modify their cash management plans in ways that would provide a sustainable boost for the U.S. economy while also increasing tax revenues.
Keywords: tax deferral, international tax, repatriation, idle cash, overseas cash, offshore earnings, clawback, dividends
JEL Classification: H20, H21, H25, K34
Suggested Citation: Suggested Citation