Top tech firms add combined $69bn to offshore profits

Eight of the biggest US technology companies added a combined $69 billion to their stockpiled offshore profits over the past year, even as some corporations in other industries felt pressure to bring cash back home.

Microsoft, Apple, Google and five other tech firms now account for more than a fifth of the $2.1 trillion in profits that US companies are holding overseas, according to a Bloomberg News review of the securities filings of 304 corporations.

The total amount held outside the US by the companies was up 8 per cent from the previous year, despite 58 companies reporting smaller stockpiles.

The money pileup, reflecting companies' incentives to park profits in low-tax countries, has drawn the attention of president Barack Obama and US lawmakers, who see a chance to tap the funds for spending programs and to revamp the tax code.

That effort is stalled in Washington, and there are few signs that tech companies will bring the profits back to the US until Congress gives them an incentive or a mandate.

Apple, Google and Microsoft each boosted their accumulated foreign profits by more than 20 per cent over the year, the largest increases by any of the 34 companies with at least $16 billion outside the US.

IBM, Cisco, Oracle, Qualcomm and Hewlett-Packard each added at least $4 billion. The profits added by the eight technology companies accounted for 45 percent of the net gain in overseas funds among the corporations surveyed.

At the same time, firms in some other industries experienced enough pressure to meet domestic needs that they chose to take the tax hit by bringing money home.

Duke Energy took a $373 million tax charge against earnings in February as part of a plan to get access to $2.7 billion in accumulated foreign profits. Stryker, a maker of medical devices, is planning to repatriate $2 billion this year. Apache, a Houston-based oil and gas company, had $17 billion indefinitely reinvested overseas at the end of 2013. Now, it has none.

GE topped the list for the fifth straight year. The company now has $119 billion outside the US, an increase of 8 per cent from the end of 2013 and a 27 per cent gain since 2010. By contrast, Microsoft has more than tripled its offshore holdings since 2010. Apple, which counts only part of its non-US holdings as indefinitely held offshore, increased that portion to $69.7 billion from $12.3 billion in 2010. Cisco now has $52.7 billion outside the US, up 10 per cent since 2013.

The potential tax revenue from offshore profits is tempting to US lawmakers, who have been struggling to fund road projects and revamp the tax system. Mr Obama earlier this year proposed applying a 14 per cent mandatory tax on the stockpiled profits and a 19 per cent minimum tax on foreign earnings going forward. The one-time tax would generate $268 billion over six years, which Mr Obama wants to use for infrastructure.

His plan hasn’t advanced in Congress, amid Republican objections to some of the details and the idea of using one-time money for needs such as highway construction.

The president met this week with the chief executive officers of Xerox, Micron Technology, Qualcomm, IBM and EMC, which have a combined $114 billion in accumulated offshore profits.

Bloomberg