The Trouble With a Repatriation Holiday

The U.S. government taxes the worldwide income of U.S. multinational corporations, but profits earned overseas are not actually subject to tax until a company repatriates them or brings them home. To avoid double taxation when “deferred” earnings are repatriated and taxed, companies receive a credit for any foreign taxes already paid on them. For obvious reasons, multinationals have a strong incentive to keep their profits offshore for as long as possible, and they very creatively use tax-law loopholes to avoid repatriation and taxation.