Today, by a vote of 42-55, the Senate defeated a bipartisan amendment introduced by U.S. Senators Barbara Boxer (D-CA) and John Ensign (R-NV) that would have provided strong incentives for U.S.-based companies to bring foreign earnings home and invest in the U.S. economic recovery.
Senator Boxer said, "In this difficult economic environment, we need to be making it easier for companies to invest in our economic recovery, not harder. Many U.S. multinational companies have significant earnings from overseas that could be used to invest in the economic recovery, but the current tax structure gives them more incentive to leave those earnings overseas."
"If the money stays overseas, it will create jobs overseas," said Senator John Ensign, Chairman of the Republican Policy Committee. "If we encourage businesses to bring the money back to the United States, it will create jobs in the United States. If Congress really wants to provide incentives that will stimulate the economy and help hardworking Americans, this plan would have gone a long way."
"This is a common sense proposal to allow firms to access the capital they need for training, investments in alternative energies, and research and development," Senator Specter said. "This amendment provides relief to companies unable to access our frozen credit markets. When this effort was used in 2004, the IRS collected $18 billion in tax revenue on earnings that would otherwise have stayed overseas instead of being reinvested here at home."
The Boxer-Ensign amendment, co-sponsored by Senators Arlen Specter (R-PA), Evan Bayh (D-IN) and James Inhofe (R-OK), would have allowed U.S. companies to temporarily repatriate foreign-earned income at a 5.25 percent tax rate, down from a maximum rate of 35 percent, in either 2009 or 2010.
The amendment restricted the use of repatriated funds to the specific purposes of worker hiring and training, research and development, capital improvements, acquisition of business entities to retain or create U.S. jobs, and clean energy initiatives.
It also addressed concerns that a similar law, passed in 2004, was too loose and allowed companies to use repatriated funds to replace domestic capital by requiring foreign funds to be spent in addition to current spending levels.
In order to ensure transparency and accountability on how funds are used, the amendment also required any company that repatriates funds to undergo an audit no later than two years after the repatriation.
After the passage of the 2004 amendment, U.S. companies repatriated approximately $300 billion, adding $18 billion in revenue to the U.S. Treasury. According to a survey of participating companies, approximately 62 percent of repatriated funds were spent on worker hiring and training, R&D and capital investments.
Oracle, a California high-tech company used funds repatriated in 2004 to outbid foreign competitors to acquire two U.S. companies - one in California, the other in Minnesota - and kept the companies and their intellectual property in the United States. Since the acquisitions, Oracle has increased jobs at both firms. Intel, another California company, was able to use repatriated funds to help build new fabrication plants.