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No Surprise: Apple's Repatriation Bill Is Huge

Posted on January 19, 2018 by Amanda Athanasiou

A sizable bite of the $350 billion Apple Inc. says it will directly contribute to the U.S. economy over the next five years will come from deemed repatriation tax payments, according to the company. 

Already the largest U.S. taxpayer, Apple expects to make a repatriation tax payment totaling approximately $38 billion, “likely the largest of its kind ever made,” thanks to the Tax Cuts and Jobs Act, according to a January 17 press release. Apple’s ongoing tax payments and tax revenues generated from employees’ wages and the sale of Apple products are not included in the $350 billion estimate, the company said. 

“I’m sure that will be used for purposes of jobs or infrastructure and so forth,” Apple CEO Tim Cook said of the repatriation charge during an interview with ABC News correspondent Rebecca Jarvis. 

Apple’s repatriation tax may well be unprecedented, as is its stockpile of offshore earnings. Of the $2.6 trillion in accumulated offshore profits held by Fortune 500 companies, a quarter is held by just four companies and Apple is one of them, according to an October 2017 report by the Institute on Taxation and Economic Policy and the U.S. Public Interest Research Group Education Fund. 

The report pegged Apple’s foreign-held sum at $246 billion, “greater than any other company’s offshore cash pile.” Rounding out the top four are Pfizer, Microsoft, and General Electric. 

As of September 30, 2017, the cash, cash equivalents, and marketable securities held by Apple’s foreign subsidiaries totaled $252.3 billion, up from $216 billion the year before, according to the company’s most recent annual report. The company’s effective tax rate, which has been in the 24 to 26 percent range since 2015, differs from the former federal statutory rate of 35 percent “due primarily to certain undistributed foreign earnings, a substantial portion of which was generated by subsidiaries organized in Ireland,” according to the report. 

Apple makes at least two-thirds of its profits offshore and has been advocating for a way to repatriate those profits without incurring a huge penalty, Cook told Jarvis. “We’re going to bring the vast majority of it here,” he said. “We’ve always felt very comfortable with paying a lot in taxes, just not a huge, huge amount.” 

The company said on January 17 that it plans to invest over $30 billion in U.S. capital expenditures and will create over 20,000 new jobs at existing campuses and a new campus it’s planning to open to house technical support for customers. The new location will be announced later this year, the company said. Cook specified the campus will not be in California or Texas, where Apple already has campuses. 

The promise of thousands of new jobs contrasts with recent announcements by a number of other companies, which promised bonuses and sometimes increased wages in response to tax reform, but stopped short of guaranteeing job creation. Not all of Apple’s planned investments can be attributed to tax reform, however, according to Cook. 

There are large parts of Apple’s announcement that come as a result of tax reform, and there are large parts that the company would have done anyway, Cook said. He said he hasn’t spent a lot of time categorizing which investments are attributable to tax reform because, to him, “this is about America.” Apple wants to help America and “it feels great to do that today,” he said.