Will the United States Let Apple Inc. Bring Its $132 Billion Home?

Apple's balance sheet is swelling with cash held overseas, and the company isn't alone. More than $1 trillion worth of cash is held on the balance sheets of U.S. companies, and the majority of it is held overseas. The reason? The United States levies a repatriation tax on corporate profits. If a company paid 10% taxes overseas on profits, it would need to pay up to 25% -- the remaining tax amount to hit top corporate tax rates in America -- to bring that money home. 

Yet relief may be on the way. The U.S. Senate is considering a temporary tax break allowing companies to bring back the money they have in banks abroad, which would generate income the government wants to use for infrastructure improvements. Allowing companies such as Apple to repatriate money from overseas accounts at a lessened tax rate would also be a big boon across the entire tech industry, as most large tech companies have accumulated large cash piles. Apple alone has roughly $132 billion held abroad. 

Any such measure would likely be a huge catalyst across the technology sector. Larger tech companies that are so large and dominant in their spaces that they've become value stocks -- companies such as Cisco Systems (NASDAQ: CSCO  ) and Qualcomm  (NASDAQ: QCOM  ) -- could use money from abroad to increase their dividends. For example, while Qualcomm currently has more than $30 billion in cash and investments on its balance sheet, it's hampered in its ability to increase dividends by how much available cash it has in the United States. Likewise, Cisco and other large tech companies have been taking on debt to pay their dividends, even while their total cash piles continue to grow. The debt allows them to pay dividends to shareholders, while it keeps overseas profits out of U.S. bank accounts. 

In this episode of The Next, Motley Fool tech analyst Eric Bleeker and Rule Breakers analyst Simon Erickson talk about the United States' repatriation tax system and what a tax holiday -- or a complete overhaul of it -- would mean for businesses.

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  • Report this Comment On June 15, 2014, at 9:53 PM, EquityBull wrote:

    Never gonna happen. US politicians all too stupid to do something that is 100% logical and makes sense. There is just no way. The 35% will stand for the foreseeable future. No repatriation holiday or permanent tax code change. If you can make one smart bet then bet on politicians doing the wrong/dumb thing. That is a smart money bet anyday

  • Report this Comment On June 16, 2014, at 8:44 AM, single07 wrote:

    Could be a real kickstart for the economy and result in some jobs coming back to the US.

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Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

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Eric Bleeker

Eric started at The Motley Fool in 2008 working in the Tech & Telecom sector. Today, he's the General Manager of You can follow him on Twitter to stay up to date with his tech industry analysis.

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