Senators Rand Paul (R-KY) and Barbara Boxer (D-CA) today announced their intention to introduce a bill that would allow companies to repatriate overseas earnings at a 6.5% tax rate. The repatriated funds then would be transferred to the Highway Trust Fund, which otherwise is scheduled to exhaust its funding by June 1.
The proposal fact sheet [PDF 363 KB] indicates that taxpayers would be able to use the favorable 6.5% rate only to the extent that repatriations exceed average repatriations in recent years. The funds repatriated would have to be earned prior to 2016, and transfers of earnings would have to be completed within five years.
The proposal would prohibit the use of repatriated funds for executive compensation, increases in shareholder dividends, and stock buybacks for a three-year period. The fact sheet also indicates that the proposal would provide that a “portion” of repatriated funds would be used for “increased hiring, wages, and pensions; R&D; environmental improvements; public-private partnerships; capital improvements; and acquisitions.”
Any company taking advantage of the provision that inverts within 10 years would be forced to repay the tax benefits with interest.
No revenue estimate has yet been provided by Senators Boxer and Paul.
In July 2014, Congress provided temporary funding for the Highway Trust Fund, through May 31, 2015.
Congress has considered several alternatives to provide long-term funding for the trust fund and must reach agreement on a funding mechanism before June 1, 2015, to keep the fund solvent.
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