Corporate America is repatriating a fraction of foreign profits

U.S COMPANIES REPATRIATED $876.8 billion from the Republican overhaul of the international tax system and the end of the first quarter of 2019. President Donald Trump said $4 trillion would return as a result of the law. / BLOOMBERG FILE PHOTO/ANDREW HARRER
U.S COMPANIES REPATRIATED $876.8 billion from the Republican overhaul of the international tax system and the end of the first quarter of 2019. President Donald Trump said $4 trillion would return as a result of the law. / BLOOMBERG FILE PHOTO/ANDREW HARRER

WASHINGTON – Corporations brought $100.2 billion of overseas profits back to the United States in the first quarter, marking $876.8 billion that has returned since Congress overhauled the international tax system and prodded companies to repatriate more.

The cash that has come back to the U.S. falls short of the $4 trillion President Donald Trump said would return as a result of the 2017 tax law. Investment banks and think tanks have estimated that U.S. corporations actually held $1.5 trillion to $2.5 trillion in offshore funds at the time the law was enacted.

While the pace at which companies are bringing back profits has slowed, the figure for the fourth quarter of last year was revised up to $146.6 billion from $85.9 billion.

Before the new tax law, companies kept much of their overseas profit offshore to avoid a 35% tax that kicked in when they brought the money back to the U.S. The Republican tax law set a one-time 15.5% tax rate on cash and 8% on non-cash or illiquid assets, regardless of where the profits sat.

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However, nearly half of the offshore profits may never come back to the U.S. because they are illiquid assets that can’t easily be repatriated, according to a 2016 paper led by Jennifer Blouin, a researcher at the University of Pennsylvania. Only about 54% of offshore profits are held in cash, according to her research.

The repatriation figures were part of a quarterly report on the current-account deficit, which narrowed to $130.4 billion in the January to March period from $143.9 billion. The gap is considered the broadest measure of international trade because it includes income payments and government transfers.

Katia Dmitrieva and Laura Davison are reporters for Bloomberg News.