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Why Big U.S. Companies Park Billions Overseas

As you scurry to pay your taxes, hundreds of U.S. companies are saving billions of dollars by parking their money outside the U.S. and avoiding taxation. With a recent Bloomberg study showing that big companies added more than $200 billion to their offshore balances over the past year, bringing the total to $1.95 trillion, many wonder what can be done.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through why Apple (NASDAQ: AAPL  ) , Microsoft (NASDAQ: MSFT  ) , IBM (NYSE: IBM  ) , and dozens of other major corporations keep their cash outside U.S. borders. Dan notes that the key is the U.S. tax system, which doesn't tax offshore profits until they get repatriated, giving them valuable tax deferral. Moreover, Dan points out that in 2004, Pfizer (NYSE: PFE  ) , Hewlett-Packard (NYSE: HPQ  ) , and dozens of other companies took advantage of a repatriation tax holiday that greatly lowered their tax bill. Although policymakers think another tax holiday might be a mistake, one proposal involves lowering U.S. corporate taxes to make them more competitive with the rest of the world and reduce the incentive that Apple, Microsoft, IBM, and others have in keeping money overseas.

Take advantage of this little-known government tax rule
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

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  • Report this Comment On March 31, 2014, at 9:26 AM, jdmeck wrote:

    Why should a business be taxed for profits on a product made and sold in another country? What right does the American government have to tax profits that have nothing to do with our country? The company pays tax in the country where the product was sold. The company pays real estate, social security and other taxes in the United States. Maybe those who leech off of others need to be less greedy.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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