Scott Silvestri, a spokesman for Exxon, said the oil company doesn’t have any deferred tax liabilities for unremitted foreign earnings, but does have foreign tax credits that could help to reduce its tax bill.

U.S. Quirks

Differences in corporate tax planning stem from some quirks of the U.S. tax code that Trump and congressional Republicans want to end. Unlike other developed countries, the U.S. taxes its corporations on their global income -- not just their domestic earnings. However, companies can defer paying tax on their foreign income until they decide to return it, or “repatriate” it, to the U.S.

The deferral provision has incentivized U.S. companies to amass more than $2.6 trillion in untaxed profit overseas, according to an estimate by Congress’s Joint Committee on Taxation. That’s more than the annual gross domestic product of California, the world’s sixth-largest economy, based on data from the International Monetary Fund.

Trump and House Speaker Paul Ryan have proposed ending the global approach to corporate taxation. As part of the transition to a system that would tax only domestic economic activity, they propose reduced tax rates for companies’ accumulated foreign earnings. During his campaign, Trump called for a 10 percent rate -- though the tax-plan outline he released in April didn’t specify a rate. Ryan and others have proposed taxing foreign earnings held as cash at an 8.75 percent rate, and all other foreign earnings at 3.5 percent.

‘Deemed Repatriation’

Both plans call for “deemed repatriation” taxes. That means companies would owe the tax regardless of whether they actually repatriate the income. That’s an important distinction -- and it helps explain why some companies would see bookkeeping benefits and others wouldn’t.

Under the current system, companies can choose to classify at least some of their foreign income as “permanently reinvested” offshore, meaning they plan to leave it where it is -- and don’t plan to owe any U.S. taxes on it. For that portion of their income, there’s no need to book a deferred tax liability. As a result, investors aren’t always provided with enough detail about what kind of hit a company would take from bringing money back, according to Thomas Selling, a retired accounting professor and a former academic fellow at the Securities and Exchange Commission.

But a few companies choose not to label large amounts of their offshore earnings as permanently reinvested because they may need to tap that money in the future. In such cases, they have to book a deferred tax liability -- as Apple and Pfizer have.

‘Looks Prescient’