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Senate Panel to Study Corporations’ Offshore Cash Holdings

The Senate Permanent Subcommittee on Investigations is reviewing how companies might use offshore cash they are seeking to transmit to the U.S. at a low tax rate.

Companies including Apple Inc., Google Inc. and Pfizer Inc. are pressing Congress to approve a repatriation holiday that would allow them to transfer overseas profits to the U.S. and pay a tax levy that is less than the current 35 percent statutory rate. Senator Carl Levin, a Michigan Democrat and chairman of the subcommittee, sent surveys to DuPont Co. and Cisco Systems Inc. seeking information on how the companies might use repatriated funds.

“The Permanent Subcommittee on Investigations is currently reviewing matters relating to the repatriation of offshore funds,” Levin wrote in a letter to DuPont chief executive Ellen Kullman dated June 29 and obtained by Bloomberg News yesterday. “The subcommittee seeks information about your company’s plans if Congress enacted the proposed tax repatriation.”

Elise Bean, the subcommittee’s staff director, wouldn’t comment on the letter. Representatives for DuPont, a chemical and life sciences company, weren’t available to comment. John Earnhardt, a spokesman for Cisco, confirmed in an e-mail today that the company had received the letter and is reviewing it.

Foreign Earnings

The survey seeks details about the companies’ undistributed accumulated foreign earnings, including how much money the company holds offshore, where the money is held, the name of each “controlled foreign corporation” that held earnings at the end of fiscal 2010 and how much money those entities held.

Levin also requested information about which financial institutions hold the offshore earnings, the type of accounts in which the earnings are held, how much money is held in U.S. dollars and whether those earnings were used to purchase assets or make investments in the U.S.

He asked the companies to respond by July 20. It was unclear which companies beyond DuPont and Cisco received the letter.

DuPont had $12.6 billion in earnings held outside the U.S. as of Dec. 31, 2010, according to the company’s annual filing with the Securities and Exchange Commission. The company isn’t part of the coalition lobbying for a repatriation holiday.

Cisco, which is lobbying for the holiday, has $31.6 billion invested outside the country, according to its SEC filing.

Tax Investigations

Levin has shown an interest in using his panel, part of the Senate Homeland Security and Governmental Affairs Committee, to probe tax issues. In July 2008, he called on the Internal Revenue Service to crack down on businesses that owe employment taxes. A year later, he was critical of the U.S.-Swiss agreement to divulge information on 4,450 UBS AG accounts to the IRS.

The corporate push for a repatriation holiday has gained momentum in recent weeks as senior Democrats, including Senator Charles Schumer of New York, have signaled a willingness to consider the idea as long as there is a tie to job creation. Schumer said on June 22 that Senate Democrats were open to a repatriation holiday if the tax revenue pays for infrastructure.

Schumer was one of 48 members of the Senate Democratic caucus to oppose a repatriation holiday proposed in 2009.

Brady Bill

Representative Kevin Brady, a Texas Republican, introduced legislation in May that would allow companies to repatriate profits at a 5.25 percent tax rate. The bill includes what he has called a “disincentive” to job cuts through a provision that would require companies to add $25,000 to their taxable income each time they reduce their total workforce below the company’s average.

With a 35 percent tax rate, the provision would increase a company’s tax bill by $8,750 for each job reduction.

Brady said in an interview today that Congress shouldn’t try to micromanage companies’ use of their cash.

“No one yet has explained why a dollar of American profits left overseas is better than a dollar of American profits brought back here -- for any reason,” he said.

The congressional Joint Committee on Taxation has said a tax holiday would cost $78.7 billion over 10 years.

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