The largest U.S.-based companies expanded their untaxed offshore stockpiles by $183 billion in the past year, increasing such holdings by 14.4 percent, according to data compiled by Bloomberg.
Microsoft Corp., Apple Inc. and Google Inc. each added to their non-U.S. holdings by more than 34 percent as they reaped the benefits of past maneuvers to earn and park profits in low- tax countries. Combined, those three companies alone plan to keep $134.5 billion outside the U.S. government’s reach, more than double the $59.3 billion they held two years earlier.
The build-up of offshore profits -- totaling $1.46 trillion for the 83 companies examined -- is increasing because of incentives in the U.S. tax code for booking profits offshore and leaving them there. The stockpiles complicate attempts to overhaul the tax system as lawmakers look for ways to bring the money home and discourage profit shifting.
“The corporate system is broken and it’s broken primarily because of international,” said Edward Kleinbard, a tax law professor at the University of Southern California.
The ability to defer U.S. taxes until profits are brought home, the ease of shifting profits to low-tax countries and the world’s highest statutory corporate rate have all contributed to the growing stockpiles outside the U.S.
A report last year by analysts at JPMorgan Chase & Co. estimated that all U.S.-based companies had $1.7 trillion in accumulated offshore profits. In the data compiled by Bloomberg, 83 companies had about 75 percent of last year’s total, which suggests that the total for all companies now exceeds $1.9 trillion.
General Electric Co. again leads all U.S. companies with $108 billion held offshore, up from $102 billion a year earlier. Pfizer Inc. is second with $73 billion, followed by Microsoft, Merck & Co., Johnson & Johnson and International Business Machines Corp. The data comes from companies’ annual regulatory filings.
Eleven companies, including Apple, Cisco Systems Inc. and Citigroup Inc., have at least $40 billion in profits reinvested overseas, up from six companies that had crossed that mark last year and three the year before that.
The data compiled by Bloomberg examined 83 U.S.-based companies that each reported holding more than $4 billion in earnings outside the country indefinitely in one of the past two years.