U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

1 

70–710 

" ! COMMITTEE PRINT 112th Congress 

1st Session 

S. PRT. 

2012

112–27 

REPATRIATING OFFSHORE FUNDS: 

2004 TAX WINDFALL FOR 

SELECT MULTINATIONALS 

MAJORITY STAFF REPORT 

PREPARED BY THE

PERMANENT SUBCOMMITTEE ON 

INVESTIGATIONS 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OCTOBER 11, 2011 

Available via http://www.fdsys.gov/ 


congress.#13
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

PATRICIA R. HOGAN, Publications Clerk 

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS 

CARL LEVIN, Michigan, Chairman 

THOMAS R. CARPER, Delaware 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

TOM COBURN, Oklahoma 

SUSAN M. COLLINS, Maine 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RAND PAUL, Kentucky 

ELISE J. BEAN, Staff Director and Chief Counsel 

ROBERT L. ROACH, Counsel and Chief Investigator 

ALLISON F. MURPHY, Counsel 

MARCELLE D. JOHNS, Detailee 

MICHAEL J. MARTINEAU, Detailee 

MARY D. ROBERTSON, Chief Clerk 

(III) 

C O N T E N T S 

Page 

REPATRIATING OFFSHORE FUNDS: 

2004 TAX WINDFALL FOR SELECT MULTINATIONS 

October 11, 2011 

I. EXECUTIVE SUMMARY ................................................................................. 3 

A. Subcommittee Review .............................................................................. 3 

B. Report Findings ......................................................................................... 4 

1. U.S. Jobs Lost Rather Than Gained ........................................................ 4 

2. Research and Development Expenditures Did Not Accelerate .............. 4 

3. Stock Repurchases Increased After Repatriation ................................... 4 

4. Executive Compensation Increased After Repatriation ......................... 4 

5. Only a Narrow Sector of Multinationals Benefited ................................ 5 

6. Most Repatriated Funds Flowed from Tax Havens ................................ 5 

7. Offshore Funds Increased After 2004 Repatriation ................................ 5 

8. More than $2 Trillion in Cash Assets Now Held by U.S. Corporations 5 

9. Repatriation is a Failed Tax Policy .......................................................... 5 

C. Report Recommendation ......................................................................... 5 

II. BACKGROUND ................................................................................................ 6 

A. The U.S. International Tax System ....................................................... 6 

B. American Jobs Creation Act of 2004 ..................................................... 7 

C. 2004 AJCA Repatriation Profile ............................................................. 9 

III. SUBCOMMITTEE REVIEW ......................................................................... 10 

A. Results of the Subcommittee Survey .................................................... 11 

1. U.S. Jobs .................................................................................................... 12 

2. Research and Development Expenditures ............................................... 17 

3. Stock Repurchases ..................................................................................... 20 

4. Executive Compensation ........................................................................... 23 

5. Industry Sectors Benefiting from Repatriation ....................................... 28 

6. Source of Repatriated Funds .................................................................... 30 

7. Corporate Funds Held Offshore Post-Repatriation ................................. 33 

8. Current Domestic Cash Assets ................................................................. 37 

9. 2004 Repatriation Did Not Achieve Intended Stimulus Effect .............. 39 

B. Conclusion ................................................................................................... 41 

IV. APPENDIX ....................................................................................................... 42 

Table 1—U.S. Employment ............................................................................... 42 

Table 2—Stock Repurchases ............................................................................. 43 

Table 3—Executive Compensation ................................................................... 44 

Table 4—Dollar Value of Restricted Stock Awards for Five Most Highly 

Compensated Executives at Surveyed Corporations ...................... 45 

Table 5—Dividends from Tax Haven CFCs ..................................................... 54 

Table 6—Post-AJCA Accumulated Offshore Funds, 2006-2010 ..................... 55 

Table 7—Pre-AJCA Accumulated Offshore Funds, 2000-2004 ....................... 56 

Page

IV 

ADDENDUM 

OFFSHORE FUNDS LOCATED ONSHORE 

December 14, 2011 

I. EXECUTIVE SUMMARY ................................................................................. 57 

A. Report Addendum Findings .................................................................... 57 

1. Surveyed Corporations Had $538 Billion in Undistributed Accumulated Foreign Earnings ............................................................................. 57 

2. Almost Half of the Surveyed Corporations’ Offshore Tax-Deferred 

Corporate Earnings Were Invested in U.S. Assets ................................. 57 

B. Report Addendum Recommendation ................................................... 58 

II. BACKGROUND ................................................................................................ 58 

III. SUBCOMMITTEE REVIEW ......................................................................... 59 

IV. CONCLUSION ................................................................................................. 63 

REPORT EXHIBITS 

1. Excerpt from ‘‘Estimated Budget Effects of the Conference Agreement 

for H.R. 4520, The American Jobs Creation Act of 2004,’’ revenue 

chart prepared by the Joint Committee on Taxation, October 7, 2004; 

and letter from the Joint Committee on Taxation to The Honorable 

Lloyd Doggett, U.S. House of Representatives, providing revenue estimates for two proposals to modify Section 965 of the Internal Revenue 

Code, April 15, 2011 ...................................................................................... 65 

2. Excerpt from Cisco System, Inc. Response To Permanent Subcommittee 

on Investigations Survey, 2/18/09 ................................................................ 80 

3. Excerpt from Altria Group, Inc. Response To Permanent Subcommittee 

on Investigations Survey, 2/18/10 ................................................................ 81 

4. Excerpt from Microsoft Corporation Response To Permanent Subcommittee on Investigations Survey, 2/18/09; and Microsoft Corporation 

FY06 Domestic Reinvestment Plan, May 25, 2006 .................................... 82 

5. Excerpt from Oracle Corporation Response To Permanent Subcommittee on Investigations Survey, 2/17/09; and Oracle Corporation 

Section 965 Domestic Reinvestment Plan, May 27, 2005 .......................... 89 

6. Excerpt from The Coca Cola Co. Response To Permanent Subcommittee 

on Investigations Survey, 2/13/09 ................................................................ 94 

7. Excerpt from The Procter & Gamble Company Response To Permanent 

Subcommittee on Investigations Survey, 2/26/09 ....................................... 95 

8. Excerpt from Schering-Plough Corporation Response To Permanent 

Subcommittee on Investigations Survey, 2/18/09 ....................................... 96 

9. Excerpt from Johnson & Johnson Response To Permanent Subcommittee on Investigations Survey, 2/24/09 ............................................. 97 

10. Offshore tax dodging hurts U.S. business, MICHIGAN MIDLAND DAILY

NEWS, by Paul Egerman, small business entrepreneur, June 7, 2011 ..... 98 

11. A Charlie Brown Congress?, THE HILL, by Frank Knapp Jr., president 

and CEO of The South Carolina Small Business Chamber of Commerce, 

June 29, 2011 ................................................................................................ 100 

12. Letter to Congress: No Tax Holiday for U.S. Multinationals, sent by 

12 small business groups, June 14, 2011 .................................................... 102 

1 


70710.097
2 


70710.098
3 


70710.099
4 


70710.100
5 


70710.101
6 


70710.102
7 


70710.103
8 


70710.104
9 


70710.105
10 


70710.106
11 


70710.107
12 


70710.108
13 


70710.109
14 


70710.110
15 


70710.111
16 


70710.112
17 


70710.113
18 


70710.114
19 


70710.115
20 


70710.116
21 


70710.117
22 


70710.118
23 


70710.119
24 


70710.120
25 


70710.121
26 


70710.122
27 


70710.123
28 


70710.124
29 


70710.125
30 


70710.126
31 


70710.127
32 


70710.128
33 


70710.129
34 


70710.130
35 


70710.131
36 


70710.132
37 


70710.133
38 


70710.134
39 


70710.135
40 


70710.136
41 


70710.137
42 


70710.138
43 


70710.139
44 


70710.140
45 


70710.141
46 


70710.142
47 


70710.143
48 


70710.144
49 


70710.145
50 


70710.146
51 


70710.147
52 


70710.148
53 


70710.149
54 


70710.150
55 


70710.151
56 


70710.152
57 


70710.153
58 


70710.154
59 


70710.155
60 


70710.156
61 


70710.157
62 


70710.200
63 


70710.159
64 


70710.160
65 


70710.161
66 


70710.162
67 


70710.163
68 


70710.164
69 


70710.165
70 


70710.166
71 


70710.167
72 


70710.168
73 


70710.169
74 


70710.170
75 


70710.171
76 


70710.172
77 


70710.173
78 


70710.174
79 


70710.175
80 


70710.176
81 


70710.177
82 


70710.178
83 


70710.179
84 


70710.180
85 


70710.181
86 


70710.182
87 


70710.183
88 


70710.184
89 


70710.185
90 


70710.186
91 


70710.187
92 


70710.188
93 


70710.189
94 


70710.190
95 


70710.191
96 


70710.192
97 


70710.193
98 


70710.194
99 


70710.195
100 


70710.196
101 


70710.197
102 


70710.198
103 

Æ 


70710.199