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GE Proposes to Repatriate $36 Billion of Cash from Overseas

June 08, 2015

GE will bring back $36 billion held overseas and will incur an additional $6 billion tax liability as a result; many are questioning why the company decided that now is the time to incur this high tax.

General Electric announced in April that it intends to repatriate $36 billion of cash held overseas, which will come with a tax price tag of approximately $6 billion. This decision comes as a surprise to many because of GE’s history of maintaining a low effective corporate tax rate.

GE’s Decision

Many are wondering why GE chose to repatriate the overseas cash considering the tax burden that will result. Furthermore, does this move set any kind of precedent for other U.S. multinationals?

Repatriation is the act of a U.S. multinational enterprise bringing its cash from overseas operations back to the United States for use for any number of purposes. Because of the relatively high tax rates of the United States, however, the price of repatriation is usually too much to bear. As a result, an enormous amount of cash remains overseas.

In order to stimulate the economy, Congress enacted a “Repatriation Holiday” under Internal Revenue Code Section 965 in 2004 which allowed U.S. companies to bring funds back to the U.S. at a reduced effective tax rate if they satisfied certain conditions.

Although similar incentives have been proposed since 2004, none have gained much traction. It is unclear whether other companies could grow impatient waiting for another repatriation holiday and take similar action. If there is not strong business need for the cash, it is not likely due to the high tax cost.

For more information read our article: “GE to Bring Billions of Dollars Back to U.S., Pay $6 Billion Tax Bill”.

Questions? Contact any member of our Global Tax Services team.

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