September 20, 2011 / 9:00 AM / 6 years ago

UPDATE 2-SEC asks US companies to disclose offshore cash

* Big tax bills may affect companies’ cash picture

* Overseas cash at center of lobbying effort

By Dena Aubin

Sept 20 (Reuters) - 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 corporate rate.

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.


    “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 activities.

    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. [ID:nN1E76P22A]

    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 Lewis)

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