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Repatriation Holiday in the Driver’s Seat?

Sutherland Asbill Brennan LLP - Washington Office

July 3, 2014

Previously published on June 25, 2014

Senator Harry Reid (D-Nev.) and Sen. Rand Paul (R.-Ky.) are in negotiations on a one-time repatriation “holiday,” which would allow U.S. corporations to repatriate foreign earnings at a special reduced rate. No proposal has formally been released, but reports on the negotiations say that the rate would be between 5 percent and 9.5 percent. The short-term revenue increase would be used to replenish the Highway Trust Fund, the primary source of federal spending for roads and bridges. The potential repatriation holiday would be similar to the 2004 repatriation holiday in section 965 of the Internal Revenue Code.

If Sens. Reid and Paul were able to negotiate an agreement on the repatriation holiday, it still may face significant opposition from both Republicans and Democrats. Some members of Congress do not believe the 2004 repatriation had the intended effect of boosting the U.S. economy, while others are worried that another repatriation holiday would lead businesses to expect more repatriation holidays in the future. The Joint Committee on Tax estimates that a proposal matching the 2004 repatriation would ultimately produce less tax revenue over 10 years. Leaders of the major tax writing committees also see revenue from repatriated funds as a way to offset the cost of comprehensive tax reform. With no proposal released, some are skeptical that the agreement would be a “clean” repatriation, and may oppose the plan if it makes other changes, such as reducing the benefit of U.S. interest deductions.

Read more in The New York Times, and Tax Analysts (subscription required)


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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