It makes absolutely no sense for U.S. companies to repatriate their overseas income. Indeed, it makes so little sense, lots and lots of U.S. companies tried to stop being U.S. companies until the White House stepped in last year. Mostly, it’s because of the massive tax bill that appears when the money lands on these shores, a tax bill that can be indefinitely avoided if you just don’t do something dumb like repatriate the said money. It makes especially little sense right now, since it’s unclear what the government has planned to encourage companies to bring some of their $2.1 trillion home. And yet, the members of the S&P 500 Index inexplicably repatriated some $300 billion last year, 7% more than in 2013 and the most since Congress last granted a tax holiday. Why? No one knows.
“It’s still a mystery,” said Anthony Carfang, a partner at Treasury Strategies Inc., a Chicago-based consulting firm. “There may be ways to use the money in the U.S. that’s going to get companies a higher rate of return….” There’s little apparent reason “for companies to bring the money back right now,” said Mr. Carfang...Buybacks have become a popular use for foreign earnings…. Others are using the cash to pay down debt...Concern about the cost of a tax audit or penalty could be motivating some U.S. companies to bring money home. Credit Suisse’s analysts said that companies might be finding it harder to make the case that their foreign earnings are indefinitely invested, especially the large sums simply sitting in cash accounts.