Apple recently said it had $252 billion in cash or cash equivalents abroad
Apple Inc. AAPL 1.65% said it would pay a one-time tax of $38 billion on its overseas cash holdings and ramp up spending in the U.S., as it seeks to emphasize its contributions to the American economy after years of taking criticism for outsourcing manufacturing to China.
The world’s most valuable publicly traded company laid out its plans Wednesday in a statement that was full of big-dollar figures, though it said that much of the money reflected Apple’s current pace of spending.
Taxing Foreign Profits
Companies have long sheltered foreign profits offshore. Now the tax bill is coming due. How much will they pay?
Apple said it would invest $30 billion in capital spending in the U.S. over five years that would create more than 20,000 jobs. The total includes a new campus, which initially will house technical support for customers, and $10 billion toward data centers across the country. It also will expand from $1 billion to $5 billion a fund it established last year for investing in advanced manufacturing in the U.S.
All told, Apple said it would directly contribute $350 billion to the U.S. economy over the next five years, with the bulk—about $55 billion this year, for example—coming from ongoing spending on parts and services from U.S. suppliers. That number also includes the federal tax payment and capital spending.
Chief Executive Tim Cook touted the plans as building on Apple’s support for the nation’s economy. “We have a deep sense of responsibility to give back to our country and the people who help make our success possible,” he said in a statement.
The announcement comes after President Donald Trump late last year signed into law a major overhaul of the U.S. tax code, under which companies must pay a one-time tax of 15.5% on overseas profits held in cash and other liquid assets. Apple cited those changes as the reason for its giant tax payment, which it said would likely be the largest of its kind, but didn’t say how much of its $252.3 billion in overseas cash holdings it plans to bring home.
The company said in November that it had earmarked $36 billion to cover deferred taxes on that money, assuming that it would eventually pay U.S. taxes on a portion of it by bringing it home.
Mr. Trump praised Apple’s announcement on Twitter, saying his policies allowed the tech giant “to bring massive amounts of money back to the United States.” He added, “Huge win for American workers and the USA!”
Apple didn’t provide historical comparisons for some of the figures it gave Wednesday. The company previously said it planned $16 billion in capital expenditures world-wide in the fiscal year that ends this September, up from $14.9 billion the previous year. However, Apple doesn’t break out its spending in the U.S., making it difficult to gauge how much of the $30 billion over five years it announced Wednesday is new.
Toni Sacconaghi, an analyst with Sanford C. Bernstein & Co., said Apple’s plans are in line with Trump administration goals, but it isn’t clear how many of the commitments are new. And he said the company could deliver on those commitments with existing cash flow—without needing to tap cash holdings.
“It’s a nice number and puts a foot forward in line with where the administration wants to go with adding jobs and building in the U.S.,” he said. But “it’s not clear these investments were impacted in any way by tax reform.”
Apple has faced criticism over the past decade for overseas manufacturing of its iPhones, of which it has sold more than one billion, rather than making them domestically. Mr. Trump during the presidential campaign blasted the company for outsourcing. He later called on Apple to build a factory in the U.S. and last year said Mr. Cook promised to build three plants in the U.S.
Apple has responded over the past year by pointing to its spending on procurement in the U.S. and to the size of the so-called app economy spawned by the iPhone, which the company says has created more than 1.6 million U.S. jobs.
The tax overhaul’s one-time levy on overseas cash is often referred to as a repatriation tax, although it applies whether companies leave their foreign profits overseas or bring them to the U.S. It is intended as a transition from the previous tax system, under which the U.S. taxed all world-wide profits of an American company except those kept overseas, to the new system, in which the U.S. won’t tax most foreign profits at all. Companies may choose to pay the one-time tax over eight years.
The $38 billion in taxes Apple owes reflects its growth in the decade since Congress last reduced taxes on overseas holdings. In 2006, Apple recorded a tax charge of $51 million as it repatriated $1.6 billion in cash held overseas for the fiscal year.
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Apple’s accumulated foreign profits of $252.3 billion amount to just over a quarter of the U.S. tech industry’s total, a Wall Street Journal analysis of 311 large public companies found, and about 9.5% of the $2.65 trillion in foreign profits reported by all companies in the analysis.
A tax obligation of $38 billion would work out to about 15% of the S&P 500’s total obligation under the repatriation tax, based on figures from the Journal analysis and a separate analysis by Zion Research Group. Altogether, the Joint Tax Committee estimated last month, the tax should raise about $339 billion over 10 years from all companies—meaning Apple could account for 11% of the total.
The changes in U.S. tax law triggering Apple’s $38 billion tax obligation don’t affect the company’s responsibility to repay Ireland €13 billion ($15.9 billion) in unpaid taxes in Europe, according to a spokesman for Ireland’s Department of Finance. Apple has challenged the ruling.
Apple also told employees Wednesday it is issuing each of them a bonus of $2,500 in restricted stock, according to a person familiar with the matter. The planned bonus, reported earlier by Bloomberg, adds Apple to the growing list of companies that are rewarding employees due to the new tax law, including AT&T Inc. and ComcastCorp.
If Apple brings home a large share of its overseas cash it could decide to apply some of it to more buybacks and dividends. Apple has returned $233.9 billion to investors since fiscal 2012.
Mr. Sacconaghi expects Apple to provide an update on potential increases to those programs when it reports quarterly results in April or May, when it typically announces such plans. That would give it a chance to see how much cash other companies plan to return to shareholders from overseas holdings—moves that could please investors but aren’t as helpful to public perception as investments in jobs. “No company with that much cash wants to be the first to do a significant buyback,” he said.
Apple’s announcement said it currently employs 84,000 people in the U.S., 4,000 more than it said a year ago.
The company said it would offer more information later this year on its planned new campus. The facility is expected to be located outside of California and Texas, where the company already operates campuses: in Austin, Texas, and its new $5 billion headquarters, Apple Park, in Cupertino, Calif.
—Theo Francis, Richard Rubin and Natalia Drozdiak contributed to this article.
Corrections & Amplifications
Apple had $252.3 billion in cash and marketable securities held overseas as of the end of November. An earlier version of this article incorrectly stated it had $246 billion overseas.
The Dow Jones industrial average is trading above 25,000 points for the first time early Thursday, breaking another 1,000-point milestone. The market was rising broadly after a survey showed strong hiring by U.S. private businesses. Banks are leading the way as interest rates jump. European stocks are also rising.
KEEPING SCORE: The Standard & Poor’s 500 index climbed 12 points, or 0.5 percent, to 2,725 as of 10 a.m. Eastern time. The Dow Jones industrial average rose 147 points, or 0.6 percent, to 25,069. The Nasdaq composite added 18 points, or 0.3 percent, to 7,084. The Russell 2000 index of smaller-company stocks gained 5 points, or 0.4 percent, to 1,558.
The Dow reached 24,000 on Nov. 30, just 23 trading days ago. Stocks have climbed since then as investors hoped the Republican-backed tax package would boost company profits this year. The law cuts the U.S. corporate tax rate substantially. The Dow broke through five 1,000-point milestones in 2017, on its way to a 25 percent gain for the year.
SURVEY SAYS: ADP said private U.S. businesses added 250,000 jobs last month as health care, retail and professional services companies hired more workers. The survey suggests businesses are optimistic about the economy and expect more demand. The government will release a jobs report Friday that covers both private companies and governments. Economists forecast that will show a gain of 189,000 jobs, according to a survey by data provider FactSet.
Meanwhile business activity in the 19-country eurozone reached its highest level in almost seven years. That’s based on a survey of manufacturing and services companies. One of the reasons stocks have done so well over the last year is the improved health of the global economy as European countries and both developing and advanced nations around the world experience better growth after years of struggles.
European stock indexes climbed. France’s CAC 40 leaped 1.6 percent while Germany’s DAX gained 1.5 percent. In Britain the FTSE 100 edged 0.3 percent higher.
BONDS: Bond prices sank, sending yields higher. The yield on the 10-year Treasury note rose to 2.48 percent from 2.44 percent. Banks made strong gains in early trading as increased interest rates mean they can make more money from mortgages and other loans. JPMorgan Chase gained $2.01, or 1.9 percent, to $109.51 and Wells Fargo rose $1.11, or 1.8 percent, to $62.67.
CHIP DIP: Intel continued to stumble after security researchers at Google discovered serious security flaws in its computer processors. It lost $1.90, or 4.2 percent, to $43.36 after a 3.4 percent decline Wednesday. Intel said it’s working to fix the problem and that it’s not the only company affected.
Rival Advanced Micro Devices said it believes its chips are safe and its stock jumped 83 cents, or 7.2 percent, to $12.38. Most of Intel’s rivals made big gains Wednesday.
Elsewhere among tech stocks, Google parent Alphabet climbed $11.30, or 1 percent, to $1,102.82 and Intuit added $2.44, or 1.5 percent, to $161.60.
MORE TESLA TROUBLE: Electric car maker Tesla again said it fell short of production goals for its new Model 3 sedan, which is intended to be its first lower-cost car. The shares skidded $8.47, or 2.7 percent, to $308.78.
ENERGY: Benchmark U.S. crude rose 7 cents to $61.70 a barrel in New York. Brent crude, used to price international oils, shed 7 cents to $67.77 a barrel in London.
ASIA: Japan’s benchmark Nikkei 225 advanced 3.3 percent in the first trading day of the year. South Korea’s Kospi lost 0.8 percent while Hong Kong’s Hang Seng added 0.5 percent.
CURRENCIES: The dollar rose to 112.79 yen from 112.52 yen. The euro climbed to $1.2083 from $1.2018.
Trump secures major victory as Senate Republicans pass $1.5 trillion tax cut bill despite Democrats warning they’ll ‘rue this day’ and protesters screaming ‘don’t kill us’ – paving the way for a final House vote today after earlier hiccup
The Senate passed a $1.5 trillion tax cut early in the early hours of Wednesday
Vote was along strict party lines. Only GOP Sen. John McCain was absent
The House earlier passed the tax cut by a vote of 227-203 but two provisions fell foul of parliamentary test meaning they have to vote again on Wednesday
President Donald Trump fired off a pair of tweets in the morning
Mike Pence described it as a ‘historic win for the American people’
The Senate passed the GOP’s $1.5 trillion tax cut early Wednesday morning, leaving just one technical hurdle and President Trump’s signature as the final steps before the president’s top legislative priority becomes reality.
There was little last-minute drama in the Senate where the final tally was 51-48 – hardly different from the original version that cleared the Senate earlier this month.
Not a single Democrat voted for it, just as none in the House voted for a similar bill earlier on Tuesday.
Moments after the measure passed, Trump was quick to voice his approval and said if the House succeeds in a final re-vote Wednesday morning, there will be a White House news conference at 1:00 p.m.
‘The United States Senate just passed the biggest in history Tax Cut and Reform Bill,’ he tweeted just after 1:00 in the morning. ‘Terrible Individual Mandate (ObamaCare)Repealed. Goes to the House tomorrow morning for final vote.’
House Speaker Paul Ryan tweeted: ‘Great news. The Senate just passed the Tax Cuts and Jobs Act. After years of work, we are going to enact the most sweeping, pro-growth overhaul of our tax code in a generation.’
A wave of protesters provided one of the biggest bursts of emotion. One small group yelled out ‘Kill the bill, don’t kill us!’ as the final vote was being taken.
‘The Sergeant at Arms will restore order in the gallery,’ said Vice President Mike Pence, who was presiding over the chamber.
Pence’s appearance was a flourish that put him in the spotlight – though party leaders knew in advance his potential tie-breaking vote was not needed.
One protester yelled at GOP Sen. Jeff Flake of Arizona, ‘Have you no shame?’
Flake voted for the bill, weeks after warning colleagues against complicity with Trump.
If we can’t sell this to the American people I think we ought to go into another line of work
Senate Majority Leader Mitch McConnell
Moments after the decision, far-left Democratic Sen. Bernie Sanders tweeted: ‘Senate Republicans just passed their tax reform bill. What an utter disgrace.’
Before the vote, as the debate stretched toward midnight, Pence tweeted out a photo of himself huddling with Treasury Secretary Steve Mnuchin and Trump economic advisor Gary Cohn.
The House still had to sort through one legislative hiccup – after Democrats raised a procedural objection to minor provisions in the bill that the Senate parliamentarian ruled were not allowable.
The parliamentary ruling, which was sustained after Republicans failed to strike it down, requires the House to re-vote Wednesday morning so that the House and Senate versions are identical and President Trump can sign it.
‘After eight straight years of slow growth and under-performance, America is ready to take off,’ said Senate Majority Leader Mitch McConnell of Kentucky at a press conference after passage.
Asked about a need to ‘sell’ the bill, McConnell said: ‘If we can’t sell this to the American people I think we ought to go into another line of work.’
Ryan made the rounds on Wednesday morning’s TV shows, saying on CBS that Democratic detractors predicting tax increases for the middle class are dead wrong.
‘When people see their paychecks getting bigger in February because withholding tables have adjusted to reflect their tax cuts, when businesses are keeping more of what they earn, when they can write off their expensing and investment in their businesses, and hire more people, that’s going to change its popularity. I am convinced,’ he said.
‘So I think there’s just tons of confusion out there as to what this does or doesn’t do. A lot of people think it’s going to raise their taxes, when every income tax group on average gets a tax cut. So the proof is in the pudding, and I think the results will speak for themselves.’
Senate Minority Leader Charles Schumer, the top Democrat in the upper chamber of Congress, ripped the measure as as ‘sloppy’ and ‘as partisan as the process used to draft it.’
He warned his colleagues: ‘Vote no. Otherwise, I believe the entire Republican Party, and each of you, will come to rue this day.’
Schumer called for order during his floor speech and barked at colleagues who were talking rather than listening.
‘This is serious stuff. We believe you’re messing up America. You could pay attention for a couple of minutes,’ the New York Democrat grumbled.
Another Democrat, Rep. Tim Ryan of Ohio, said Wednesday morning on CNN that while ‘a few people are going to get some crumbs’ in the form of tax relief, ‘the wealthiest people in the country are going to get all of the benefits here.’
‘It is going to be a great Christmas for the big corporations who are sitting on more cash than they’ve ever had in their lives,’ he groused.
Wavering senators removed most of the drama Tuesday night by announcing their support in advance. Tennessee Sen. Bob Corker, who Trump mocked as ‘little Bob’ during an earlier feud, flipped from opposing the earlier version to supporting the final conference report that cleared the Senate Tuesday night.
Sen. Susan Collins of Maine also tipped her hand hours before the vote, saying she would back the bill.
Sen. John McCain, who provided a dramatic thumbs-down to the GOP’s Obamacare repeal bill months ago, is recovering at home from his treatment for brain cancer and didn’t vote Tuesday night.
He had announced his backing for an earlier version of the tax cut.
The hours-long debate Tuesday was mostly kabuki theater.
Senate Finance Committee Chairman Orrin Hatch bemoaned the lack of Democratic support – although leaders decided to move the bill through procedures that allowed them to circumvent Democrats and pass it by a simple majority vote.
‘Where is this bipartisanship that this country desperately needs?’ asked Hatch. ‘Our tax policy is for the birds,’ he added.
Sen. Jeff Merkley of Oregon called the final bill an ‘abomination’ as well as ‘the biggest bank heist – not just in American history but in the history of the world.’
As the hours drew on, senators continued to inveigh one way or the other to a mostly empty chamber but with an eye toward C-Span and cable audiences.
‘Not a single Democrat would break from party discipline,’ complained Texas Republican Sen. Ted Cruz. ‘Why? Because they are so united in their rage at President Trump,’ the president’s former primary rival said.
He said families would see benefits in their pay stubs within weeks.
Democrats saw their hopes dashed of scoring another dramatic defeat of a GOP initiative, after seeing the Obamacare repeal tank earlier this year.
With passage all but assured, Sen. Ron Wyden of Oregon, the leading Democrat on the Finance Committee, turned his focus to future battles, warning Americans that Republicans would be ‘coming for your Social Security and Medicare before you take you Christmas tree down.’
Now, all that is left for the House to do is vote again following an earlier technical parliamentary error.
Speaker Ryan, who earlier said ‘this is a day I’ve been looking forward to for a long time’, will get to relive his dream Wednesday, because a few minor provisions in the House bill were out of order.
That would require another procedural motion to ensure both chambers are passing identical measures.
In that case, the House would meet at 9am Wednesday and then vote.
The rule prevents certain types of legislating in what is nominally a revenue bill – crammed into a special procedure that only requires a simple majority to pass to avoid having to negotiate with Democrats.
There are a ‘couple little glitches,’ Senate Majority Leader Mitch McConnell told Fox News Tuesday night, but they are only ‘minor adjustments.’
One of the out-of-order provisions lets people save in tax-deferred 529 plans to home school their kids, Politico reported. Another may deal with a college’s exemption from an endowment tax.
It is up to Democrats or any senator to raise an objection to force a ruling.
A Senate leadership aide downplayed the hiccup in the final stretch.
‘No one’s fault. They’re tiny provisions that don’t affect the overall bill. These small provisions were all that Dems could find. The House will pass again,’ the aide said.
An amendment by Texas Sen. Ted Cruz made it into the final conference report, allowing parents to withdraw up to $10,000 from tax-deferred 529 college savings plans for home schooling their kids at a younger age.
The plans could now be used for K-12 elementary and secondary tuition, including for home-schooling.
Aides were still scrambling to figure out how the technical ruling would affect the legislation.
Cruz touted the amendment on his Senate and campaign web site.
‘By expanding choice for parents and opportunities for children, we have prioritized the education of the next generation of Americans,’ Cruz said on the Senate floor when the amendment passed on a tie vote with an assist from Vice President Mike Pence.
A Senate GOP aide told DailyMail.com the only portion likely to be knocked out involved home schooling – not the bulk of the amendment for the first time making 529s eligible for K-12 schools including private or parochial schools.
In states that define home-schooling as a type of private school, it is possible that funding could still be eligible.
In another blow, of the PR variety, Senate Democrats objected to the pleasing name Republicans attached to the bill, the so-called short title, the ‘The Tax Cuts And Jobs Act.’
WHAT’S IN THE FINAL TAX BILL?
Top income tax bracket has dropped to 37 per cent from 39.6 per cent
Other brackets are zero, 12, 22, 24, 32 and 35 per cent
‘Standard’ deduction for non-itemizers nearly doubles
Interest is deductible only on the first $750,000 of new home mortgages
Only individuals making more than $500,000 and couples earning $600,000 are in the top bracket
Corporate tax rates drop from 35 per cent to 21 per cent
Deduction for medical expenses and student loan interest and an exemption for graduate school tuition waivers
Ends Obamacare tax penalty for failing to buy health insurance
Doubles child tax credit to $2,000 for families earning up to $400,000
$1,400 of child credit is refundable even for families that don’t pay any income tax
Doubles estate tax exemption to the first $11.2 million of inheritances
Opens a portion of the Arctic National Wildlife Refuge to oil and gas drilling
‘Pass-through’ corporations can deduct 20 per cent of income
Elimination of corporate Alternative Minimum Tax
No repeal of Johnson Amendment barring churches and religious organizations from election activity
President Donald Trump on Thursday spoke about his plan to slash government regulations, calling it “the most far reaching regulatory reform in history.”
“By ending excessive regulation, we are defending democracy and draining the swamp,” Trump said at a White House event promoting the Unified Agenda of Regulatory and Deregulatory Actions.
In January, Trump signed an executive order that said for every new regulation introduced, two must be eliminated.
Trump said that goal has been exceeded, and for every new regulation introduced, government agencies have eliminated 22.
“The never-ending growth of red tape in America has come to a sudden, screeching and beautiful halt,” Trump said.
He said that because of regulatory reform, the stock market is soaring, unemployment is at a 17-year low and wages are rising.
He said this deregulation effort is just getting started, as there are still decades of excess regulation to remove.
“Let’s cut the red tape, let’s set free our dreams and, yes, let’s make America great again. And one of the ways we’re going to do that is by getting rid of a lot of unnecessary regulation,” Trump said before symbolically cutting a ribbon on stacks of paper representing the exponential growth of the regulatory code.
Trump was just praising him but now he may be bumped
Report: Gary Cohn Could Be Bounced out of Trump White House
Gary Cohn may not be Donald Trump’s chief economic adviser for much longer.
Cohn’s fraying relationship with the president is raising questions about how much longer the former Goldman Sachs executive will remain in his post, according to a report from Reuters citing “sources close to the White House.”
The Wall Street Journal reported, and Breitbart News confirmed, that Cohn had fallen out of the running to be nominated by Trump to be the successor to Federal Reserve chair Janet Yellen. Cohn is reportedly on the outs with the president following his criticism in a Financial Times interview of Trump’s response to violence in Charlottesville, Virginia. Reuters reported that Trump “hates him” and wanted to fire Cohn.
Former White House strategist Steve Bannon said Cohn should resign for breaking with the president over Charlottesville. According to Reuters, concern that Cohn could be pressured to leave the White House has grown among Cohn’s associates over the past 24 hours.
“If you’re going to break with him resign. The stuff that was leaked out that week by certain members of the White House, I thought that was unacceptable,” Bannon told CBS anchor Charlie Rose in an interview.
Cohn said in a CNBC interview last week that he had a “great relationship” with Trump. But he avoided answering the question of whether the president refers to Cohn as a “globalist,” a reference to Cohn’s reported opposition to economic nationalist positions on trade and immigration.
