Corporations are infusing money back to the U.S. from abroad in record numbers for the third quarter since passage of the Tax Cuts and Jobs Act to the tune of $92.7 billion dollars.
Third quarter 2018 saw the fifth highest U.S. corporate repatriations, listed as dividends from foreign operations, in recorded U.S. history, according to Bureau of Economic Analysis numbers. The first and second highest were in the first and second quarters of 2018. Total corporate repatriation in the first three months of 2018 hit over $571 billion dollars.
Only two quarters in 2005 saw numbers this high. That year saw quarters three and four ranking among the top five highest repatriation numbers in U.S. history. The latter three quarters in 2005 didn’t hit half the boost seen in the first three quarters of 2018.
Quarterly direct investment earnings have remained between $114 billion and $133 billion since the beginning of 2017. The ratio between dividends, or repatriations to the U.S., and reinvested earnings, those remaining abroad, dramatically changed after passage of the Tax Cuts and Jobs Act (TCJA).
While earnings remaining abroad hovered between $65 and $102 billion dollars in 2017, repatriated funds ranged from just $26 to $55 billion. In just first quarter 2018, funds remaining abroad dove into the negative by over $166 billion dollars while repatriated funds skyrocketed to greater than $294 billion dollars.
The Tax Foundation said foreign earnings policy change under the TCJA “improves incentives going forward.” This is due to companies not owing corporate income taxes on future earnings repatriated aside from potential “minimum taxes on global income.”
“Deemed repatriation, as enacted by the Tax Cuts and Jobs Act, is a mandatory tax on past earnings held abroad,” the Foundation clarified. “Companies will owe taxes of 15.5 percent on liquid assets like cash and 8 percent on noncash assets earnings made under the old tax law, regardless of whether the cash is repatriated.”
The Foundation went on, “Companies face improved incentives for future earnings, because earnings made under the new law will not face U.S. corporate income tax. When evaluating how companies will respond there are several other factors to consider.”