* Big tax bills may affect companies' cash picture
* Overseas cash at center of lobbying effort
By Dena Aubin
Sept 20 The U.S. Securities and Exchange
Commission (SEC) has asked companies including Dow Chemical Co
(DOW.N), Fortune Brands Inc FO.N, Google Inc (GOOG.O) and
Caterpillar Inc (CAT.N) to tell investors more about cash they
hold offshore, according to letters on the SEC's website.
Many companies with apparently large overseas cash hoards
would have to pay a big tax bill if they brought the money back
to the United States, and the SEC has been asking some
companies to disclose that in their filings.
Overseas profits have helped boost cash at many U.S.
companies, but much of the money is effectively trapped there
because of the large tax payments due if it were brought back
to the United States. [ID:nN05234711]
In letters commenting on companies' regulatory filings, the
SEC suggested that more detailed information on overseas cash
is needed to help investors understand companies' liquidity, or
the amount of cash they have available when needed.
Companies usually do not have to pay U.S. taxes on earnings
generated overseas until they are brought home, and then the
companies receive a credit for foreign taxes they paid
overseas. Many companies have cash stashed in countries where
the tax rate is far lower than the United States' 35 percent
Accounting rules generally require companies to recognize a
tax expense on overseas profits as soon as they are earned, but
an exception is granted if management intends to keep the
earnings permanently invested overseas.
That exception gives companies an extra incentive to keep
cash permanently invested offshore.
LOBBYISTS PUSH REPATRIATION HOLIDAY
"Generating cash outside of the U.S. is the result of being
a global company operating in a global economy," said Jim
Dugan, Caterpillar's chief corporate spokesman.
About 70 percent of Caterpillar's business last year came
from outside the United States, Dugan said, adding that the
cash generated offshore reflected normal business
The issue has taken on more importance amid a debate about
how to tackle the nation's budget deficit and debt and whether
changes are needed in lucrative corporate tax breaks.
In addition, some U.S. lawmakers have been pushing for a
repatriation holiday to allow companies to bring overseas cash
home. The Obama administration has refused to consider a
holiday outside the context of making broad changes in the
convoluted tax code. [ID:nN1E77N0M2].
A number of large U.S. technology and pharmaceutical
companies -- from Apple Inc (AAPL.O) to Pfizer Inc (PFE.N) --
are part of a lobbying campaign for a repatriation holiday.
(Reporting by Dena Aubin in New York and Gowri Jayakumar in
Bangalore; Editing by Matt Driskill, David Holmes and Matthew