A private research firm reported that foreign profits held overseas by U.S. corporations to avoid taxes at home nearly doubled from 2008 to 2013 to top $2.1 trillion, prompting a call for reform by the Senate’s top tax law writer.
“The new members…certainly highlight what is one of the key challenges for tax reform. I do think there needs to be some reform in this area,” Senate Finance Committee Chairman Ron Wyden told reporters on Tuesday on Capital Hill.
Corporations don’t have to pay income tax on most of their overseas profits until they are brought into the United States under U.S. law. Offshore earnings can be held for years if the classifications are indefinitely invested abroad.
Research firm Audit Analytics said in a report issued last week, that the total of such earnings was up 93 percent from 2008 to 2013, citing federal financial filings for companies listed in the Russell 1000 index of U.S. corporations. The firm said, Conglomerate General Electric Co. had the biggest pile of earnings stored abroad at $110 billion.
In response, GE said in a statement: “GE operates in more than 170 countries, and most of these overseas earnings have been reinvested in active business operations like manufacturing facilities and loans to non-U.S. customers.”
Congress has fought for years over the law that lets multinationals stash profits abroad tax-free. Some feel they should eliminate the law, known as the offshore corporate income tax deferral, some backing a one-time tax holiday that would that would let companies bring foreign profits home, or “repatriate” them, at a low tax rate.
According to policy analysts, no decisive action is likely for now, however, with Congress deadlocked over fiscal issues at least until after the November mid-term congressional elections.
By next year, lawmakers are likely to push to reexamine the tax code that seems to be politically difficult and has not been accomplished since 1986, when Republican President Ronald Reagan and a divided Congress managed to get it done.
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