Investopedia: Is A Tax Holiday On The Way?

To say that the United States has some strange corporate tax rules would a bit like saying that Michael Jordan knew how to play a little basketball. One of the byproducts of the byzantine U.S. tax structure is that many corporations are forced to keep large amounts of cash in their overseas subsidiaries instead of bringing it home and paying taxes on it to the U.S. Treasury. With nearly $1.4 trillion in U.S. corporate earnings sitting overseas, investors may begin to hear more debate about whether Congress should, or will, pass some sort of tax holiday bill to allow corporations to bring this money home.


The Last Holiday Was a Mixed Blessing  
One of the arguments for tax holidays is that U.S. corporations can repatriate their cash and use it to expand their businesses and hire workers. It's a nice theory, but it does not always (or perhaps even "often") work that way. A similar repatriation holiday was passed in 2004 under the Bush administration, inside the American Jobs Creation Act of 2004. While 800 companies took advantage in 2004 and 2005, the National Bureau of Economic Research (a non-partisan non-profit economics research organization) reports that 92% of the money repatriated was paid out as dividends and stock buybacks. (Read about how these strategies saved even more taxes; check out A Breakdown Of Stock Buybacks.)

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