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U.S. Congress Warms to Repatriation

  • By Konstantine Kastens, AFP Government Relations Administrator
  • Published: 10/19/2011

Since the start of the 112th Congress, both Democratic and Republican members of Congress have introduced an unprecedented number of repatriation bills, aimed to grant multinational businesses the opportunity to bring their foreign earnings to the United States at a reduced tax rate. 

AFP began 2011 with a letter to the incoming 112th Congress urging them to consider the factors of economic growth afforded through repatriation.  Throughout discussions, AFP has aligned itself with the notion that allowing businesses to bring home their earnings from foreign operations at tax rates comparable with other nations would improve U.S. economic competitiveness. 

Senator Charles Schumer (D-NY) recently floated the option of a repatriation tax holiday to be attached to broader, more controversial legislation in need of more negotiable terms for final passage – i.e., President Obama’s jobs bill. 

Meanwhile, members on both sides of the aisle have offered legislation to enable businesses to bring home foreign earnings at reduced tax rate.

The most promising of these bills is a bipartisan version, introduced by Senator Kay Hagan (D-NC) and Senator John McCain (R-AZ). This Senate bill, S. 1671, Foreign Earnings Reinvestment Act, adopts similar language from a previously introduced House version, H.R. 1834, Freedom to Invest Act, sponsored by Representative Kevin Brady (R-TX). 

Both bills seek to establish a one-year reduction from the current 35% corporate tax rate to a two-tier rate starting at 8.75% and enabling a drop to 5.25%, if a business shows an increase of at least 10% in either salary or hiring of ‘qualified payroll’ employees.  A penalty is levied through both bills – the House version at $25,000; the Senate version at $75,000 - on businesses that cut their payrolls during the calendar year in which they repatriate earnings at the reduced rate.

Freshman Senator Mike Lee (R-UT) introduced his repatriation bill as an amendment to the Currency Exchange Rate Oversight Reform Act, which recently passed a Senate vote.   Lee’s amendment would permanently bring down corporate tax rates on repatriated earnings to 5%. 

Elsewhere, Senator Barbara Boxer (D-CA) introduced a Senate resolution to express “that comprehensive tax reform legislation should include incentives for companies to repatriate foreign earnings for the purpose of creating new jobs.” 

Freshman Representative Tim Scott (R-NC) introduced H.R.937, Rising Tides Act, which would permanently reduce corporate tax rates to 23%.  Another bill, H.R. 1036, Job Creation and Innovation Investment Act, offered by Representative Brian Bilbray (R-CA) offers a one-year zero tax-rate for foreign corporate earnings invested in research and development and a tax rate of 5.25% for earnings absent any guidelines for use of repatriated funds.   Another bill, introduced by Representative Gregory Meeks (D-NY), H.R. 2862, Putting America Back to Work, stipulates a one-year tax reduction at a 15% rate and uses the revenue proceeds toward a federal trust fund to finance infrastructure projects.  

While all mentioned bills are either held up in their respective committees or tied to other sinking legislation, what can be discerned is that the concept of incentivizing repatriation of overseas earnings transcends the party-line politics that so often hamper legislation. 

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