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Apple says it will bring much of its overseas cash home under new, corporate-friendly tax law

Apple says it will bring much of its overseas cash home under new, corporate-friendly tax law
Apple CEO Tim Cook speaks Dec. 6 during the Fortune 500 Global Forum in Guangzhou, China. (Aleksandar Plavevski / European Pressphoto Agency)

Apple revealed a plan Wednesday that would make it the first major company to repatriate money from overseas as a result of the new corporate-friendly tax law passed last month.

The tech giant said it will make approximately $38 billion in tax payments — a figure that suggests the company is moving back $245 billion out of its $252.3 billion in funds stashed overseas.

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Under the new law, companies need only make a one-time payment of 15.5% on repatriated funds, down from 35%.

The higher tax rate was the reason why Apple had long resisted sending its war chest to the U.S., Tim Cook, the company's chief executive told "60 Minutes" in 2015.

"I don't think that's a reasonable thing to do," said Cook, whose company has faced years of criticism for avoiding U.S. taxes by keeping profits overseas and doing most of its manufacturing in China.

Apple also announced Wednesday that it plans to invest more than $30 billion in the U.S. over the next five years to create over 20,000 jobs.

About one-third of that new expenditure will go to data centers. The company, which recently finished a building a $5-billion headquarters in Cupertino, Calif., said it would open another campus at an unspecified location.

"We believe deeply in the power of American ingenuity, and we are focusing our investments in areas where we can have a direct impact on job creation and job preparedness," Cook said in a statement Wednesday. "We have a deep sense of responsibility to give back to our country and the people who help make our success possible."

Though Cook and President Trump have disagreed on issues such as immigration, Apple's announcement represents a major win for the White House, which has urged U.S. companies to invest their sizable profits in American workers.

"It's a feather in Trump's cap as this was the underlying best-case scenario that U.S. companies would bring this cash home for jobs and capital expenditure," said Daniel Ives, an analyst at the investment research firm GBH Insights.

Since Trump's election, corporations have gone out of their way to underscore how the administration's policies have benefited the country — including touting worker bonuses as a result of the new tax law.

At times, that's backfired. More than a year ago, Trump appeared at a Carrier plant in Indianapolis vowing to save jobs from fleeing to Mexico. Despite state tax breaks aimed at keeping the factory open, 200 workers at the plant still lost their jobs earlier this month.

Moody's Investors Service estimates $1.4 trillion is being held offshore by U.S. multinational companies.

Apple is by far the top holder of overseas cash, followed by Microsoft Corp. ($137 billion), Cisco Systems Inc. ($70 billion) and Google's parent company Alphabet Inc. ($64 billion). Bringing those funds home will also be easier thanks to the money saved by the new federal corporate tax rate of 21%, down from 35%.

Experts say Apple and other firms that bring money back to the U.S. could use that wealth for mergers and acquisitions. The rest is expected to be deployed for stock buybacks, higher dividends and debt repayment, as well as business expansions.

The last time U.S. companies were presented with a sweetener to repatriate funds was 2004 when Congress offered corporations a 5.25% tax rate to send cash back. The plan, however, did not result in many new jobs or investment and instead mostly benefited shareholders, according to the Congressional Research Service.

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Apple's pledge to invest in new infrastructure addresses some of that skepticism.

Ives said Apple could look to acquire a major asset such as Netflix Inc., a long rumored move that would give the Cupertino, Calif. company ownership of valuable content to stream over its hardware.

Apple shares climbed 1.65% to $179.10 in late afternoon trading.

"This was the right move at the right time" for Apple, Ives said. "The Street was anticipating this and now it's about using the cash hoard for mergers and acquisitions, capital expenditure and building out the next stage of the Apple growth story."

Twitter: @dhpierson

UPDATES:

2:25 p.m.: This article was updated with comment from Daniel Ives, an analyst at the investment research firm GBH Insights.

This article was originally published at 11:20 a.m.

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