Cash hoard grows by $187 billion in untaxed overseas profits

U.S. companies led by General Electric Co. and Pfizer Inc. stockpiled an additional $187 billion in untaxed overseas profits over the past year, boosting their offshore holdings by 18.4 percent, according to data compiled by Bloomberg.

The 70 U.S.-based companies studied hold $1.2 trillion in profits around the world. GE and Pfizer have built up the most money outside the U.S., with $102 billion and $63 billion respectively, according to securities filings. Apple Inc., Google Inc. and Microsoft Corp. were among the companies that increased their accumulated overseas profits by more than 40 percent in 2011.

As U.S.-based companies expand globally, they keep profits overseas, legally out of the reach of the Internal Revenue Service. Lawmakers from both political parties point to the stockpiling as a symptom of a failed corporate tax system, even while they remain deadlocked over whether the U.S. should impose higher or lower taxes on its companies’ global profits.

“You’re seeing more and more business go on overseas, because that’s where an increasing amount of the global purchasing power is,” said Matt Miller, director of public policy at the Business Roundtable, a Washington-based association of chief executives at large companies that backs lower taxes on overseas profits. “We need to get a competitive tax system that is not antiquated and has all the complexities we have today.”

Worldwide Profit Tax

Under the U.S. tax code, the top corporate rate is 35 percent on worldwide profits. Companies receive credits for payments to other governments, and they can defer taxation while the money accumulates. When companies bring their profits home, they pay U.S. taxes after subtracting the foreign tax credits.

Democrats, including President Barack Obama, maintain that the system encourages companies to move jobs and profits overseas. He has proposed a global minimum tax on foreign profits.

Republicans, including Dave Camp of Michigan, the top tax- writer in the House of Representatives, make the opposite argument. They say the residual tax that U.S. corporations face makes them less competitive in global markets and discourages companies from reinvesting their profits at home.

Andrew Williams, a spokesman for Fairfield, Connecticut- based GE, said the company’s operations around the world support U.S. facilities that produce goods for export.

Broader Tax Base