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.
© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.