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U.S. multinational enterprises repatriated over $300 billion under the 2004 tax holiday. The repatriated funds can improve debt financing environment of nonrepatriating firms, especially those that are financially constrained. We document that such an externality of the tax holiday increases debt financing and consequently investments for financially constrained nonrepatriating firms relative to less constrained nonrepatriating firms. Using private loan market data, we further confirm a link from repatriated funds to increased debt financing for financially constrained nonrepatriating firms. Overall, the 2004 tax holiday appears to have benefited the U.S. economy through its positive externality on the debt market. [ABSTRACT FROM AUTHOR]

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The American Jobs Creation Act (AJCA) significantly lowered U.S. firms' tax cost when accessing their unrepatriated foreign earnings. Using this temporary shock to the cost of internal financing, we examine the role of capital constraints in firms' investment decisions. Controlling for the capacity to repatriate foreign earnings under the AJCA, we find that a majority of the funds repatriated by capital-constrained firms were allocated to approved domestic investment. Although unconstrained firms account for a majority of repatriated funds, no increase in investment resulted. Contrary to other examinations of the AJCA, we find little change in leverage and equity payouts. [ABSTRACT FROM AUTHOR]

The American Jobs Creation Act of 2004 (the Act) creates a temporary tax holiday that effectively reduces the U.S. tax rate on repatriations from foreign subsidiaries from 35% to 5.25%. Firms receive the reduced tax rate by electing to take an 85% dividends received deduction on repatriations in 2004 or 2005. This paper investigates the characteristics of firms that repatriate under the Act and how they use the repatriated funds. We find that firms that repatriate under the Act have lower investment opportunities and higher free cash flows than nonrepatriating firms. Further, we find that repatriating firms increase share repurchases during 2005 by approximately $60 billion more than nonrepatriating firms, an amount that cannot be explained by differences in earnings between the two groups of firms. This increase represents about 20% of the $291.6 billion repatriated by our sample firms under the Act. [ABSTRACT FROM AUTHOR]

How do U.S. companies respond to incentives intended to encourage domestic manufacturing? I study the Domestic Production Activities Deduction (DPAD), which was enacted in the American Jobs Creation Act (AJCA) of 2004 and was the third largest U.S. corporate tax expenditure as of 2017. Using confidential data from the U.S. Bureau of Economic Analysis, I find greater average domestic investment spending of $95.5–$143.6 million, but only within the sample of domestic‐only firms and not until 2010, when the greatest statutory DPAD benefits were available. Additional evidence suggests that U.S. multinational claimants invest abroad rather than in the United States and that the increased investment by DPAD firms is accompanied by a reduction in the domestic workforce, consistent with a substitution of capital for labor. I also show that the delayed investment response is due to firms engaging in other responses first, such as changing corporate reporting to shift income across time and borders. Quantifying the extent of these effects contributes to the literature that studies this tax deduction and informs policy makers as to the effectiveness of both manufacturing incentives and U.S. corporate income tax rate reductions in stimulating real domestic activity. [ABSTRACT FROM AUTHOR]

Prior studies debate whether the temporary tax holiday provided by the American Jobs Creation Act of 2004 (AJCA) increased firm spending on domestic investment. Since internal equity is an important funding source for research and development (R&D), and the AJCA lowered the cost of accessing internal equity through reduced repatriation tax rates, we hypothesize and find that on average, the AJCA led to increased firm spending on R&D. Our results bridge the gap between prior empirical results that do not show an average effect of increased domestic investment under the AJCA and survey results that report increased domestic investment as a common use of funds repatriated under the AJCA. [ABSTRACT FROM AUTHOR]

The 2004 American Jobs Creation Act (AJCA or the Act) sought to encourage U.S. companies to repatriate foreign earnings and invest them domestically in an effort to increase capital spending and employment. This investigation looks at how the two tax provisions in AJCA, i.e., the repatriation tax holiday and the domestic production activities deduction (DPAD), affected domestic investment and payout behaviors. An examination of repatriating firms based on the tightness of their capital constraints shows that the tax incentives fail to induce non-constrained, repatriating firms that benefit from DPAD to reinvest the capital domestically. Only capital-constrained, repatriating firms benefitting from DPAD increase domestic investment and reduce share repurchases; however, these firms also increase their cash dividend payments. The findings should be useful to policymakers as they consider modifying the corporate tax structure to increase domestic investment by encouraging U.S. firms to repatriate foreign earnings and reinvest them domestically. [ABSTRACT FROM AUTHOR]

This approach to the application of section 751(b) raises at least the two following issues, neither of which is addressed by the Proposed Regulations. Does Proposed Regulation section 1.704-3(f)(3)(v)(B) apply [...]

Abstract The American Bar Association Section of Taxation (the "Section") has released comments with respect to the proposed regulations issued by the Treasury and the Service pursuant to changes made [...]

I. Introduction Wall Street bankers have played a large role in helping U.S. companies engage in tax inversions, which are transactions "whereby [a company] becomes a subsidiary of a new [...]

In the 1990s and early 2000s, taxpayers who itemized deductions were allowed to deduct state and local income and property taxes, but not general sales taxes, when calculating their federal [...], This paper examines whether the change in federal deductibility of state and local sales taxes initiated by the American Jobs Creation Act of 2004 affected the distribution of state and local level revenue sources. Using data from the 2000-2008 Census Bureau State Government Tax Collections Survey, Annual Surveys of State and Local Government Finances, and Censuses of Governments, we find that federal sales tax deductibility led states to increase sales tax revenue per capita, and decrease individual income and corporate tax revenue per capita and decrease property taxes as a share of total taxes. We do not, however, find any statistically significant impacts on tax sources at the local level. Keywords: deductibility, state and local finance, sales taxes JEL Codes: H24, H71

The article discusses American taxation law in relation to business aircraft depreciation allowance laws, Section 280F of the U.S. Internal Revenue Code (I.R.C.), and the efforts to avoid the entertainment use tax deduction disallowance rules that are contained in the American Jobs Creation Act of 2004. According to the article, aircraft and other forms of tangible personal property are depreciable under Section 167 of the I.R.C. Flight itineraries and an aircraft's class life are assessed.

The article presents author's comments on the U.S. Treasury and the Service that issued regulation offering guidance on certain partnership provisions of the American Jobs Creation Act of 2004. It mentions that the Section's Partnerships and LLCs Committee responded to the government's request focused on comments in the preamble to the proposed regulations with recommendations.

We develop estimates of a firm's foreign earnings designated as permanently reinvested (PRE) and the unrecorded deferred tax liability (TAX) associated with PRE that are independent of whether a firm explicitly discloses this information. We then investigate firms' noncompliance with Accounting Standards Codification (ASC) 740 provisions that require financial statement disclosure of PRE and either the tax associated with PRE or a statement that calculating the tax is not practicable. We find that a nontrivial portion of firms do not comply with the PRE disclosure requirements and that the amounts of undisclosed PRE and the related tax are substantial in magnitude. Cross-sectional evidence suggests managers opportunistically choose when to disclose PRE and TAX and that compliance with PRE disclosure requirements increased following the American Jobs Creation Act of 2004, which increased incentives to disclose PRE. [ABSTRACT FROM AUTHOR]

This article analyzes the various deemed realization events contained in the Internal Revenue Code of 1986 (Code), as amended. The article discusses the constitutional origins of the realization doctrine and [...]

I. INTRODUCTION 963 II. EXPATRIATION UNDER IMMIGRATION LAW 963 III. TAXATION OF ALIENS AND EXPATRIATES 969 A. Residence and Source Taxation 969 B. Worldwide Taxation of U.S. Citizens 970 C. [...]

Introducing a bill in Congress is a deceptively simple procedure. ... It is one thing to introduce a bill and quite another to move it through the lawmaking process. (1). [...]

INTRODUCTION We investigate how tax rules interact with foreign investments to affect the value of U.S. multinational corporations' "permanently reinvested earnings" (PRE). Prior studies in economics and accounting examine the [...], We investigate the value of permanently reinvested earnings (PRE) of foreign subsidiaries of U.S. multinationals. We focus particularly on how firm value is affected by reinvesting P RE in financial rather than operating assets, where the reinvestment in financial assets is to avoid the U.S. repatriation tax. Consistent with prior studies, we find that the value of PRE is lower for those firms that disclose a positive U.S. tax associated with repatriation of PRE. Consistent with our hypothesis, we find that this lower value is concentrated in the subset of firms with high amounts of excess cash, our proxy for tax-related reinvestment in financial assets.

The American Jobs Creation Act of 2004 (the Act [U.S. House of Representatives 2004]) created a tax holiday encouraging firms to repatriate foreign earnings and invest that capital in the United States. However, the Act did not require a direct tracing of the spending of repatriated funds; accordingly, repatriating firms could ignore the investment prescriptions of the Act, since tax regulators were provided no legally viable basis to pursue violations of the spending requirements. We use this event to provide evidence on the effect of political scrutiny on firms' tax law compliance in a setting where regulatory enforcement plays essentially no role. Our findings suggest that repatriating firms facing greater levels of policymaker scrutiny, relative to other repatriating firms, exhibited greater compliance with the Act by increasing relative expenditures on permitted uses (R&D investment) and restraining expenditures on nonpermitted uses. We also find that the spending patterns are different only for the group of high-scrutiny firms (i.e., there is a threshold effect). Our estimates imply that the repatriation tax holiday induced, among such high-scrutiny firms alone, $0.41 of additional R&D spending per revenue dollar forgone by the Treasury under the Act. The evidence is generally consistent with the political cost hypothesis. [ABSTRACT FROM AUTHOR]

We analyze the repatriation behavior of U.S. multinational corporations under the tax holiday implemented as part of the American Jobs Creation Act of 2004. Our results suggest that tax incentives, as reflected in differences between firms' effective foreign tax rates, do not appear to be significant predictors of either participation in the tax holiday or the amounts repatriated by firms that chose to participate. In contrast, differences in financial reporting incentives were significant predictors of both participation in the holiday and the amounts repatriated. Not surprisingly, we find that firms appear to have chosen between repatriation of permanently versus temporarily deferred foreign earnings based on how the source of repatriation impacted their GAAP financial statements. Moreover, our results suggest that many firms chose to participate in the holiday only to the extent necessary to achieve financial reporting goals. Overall, our results suggest that financial reporting incentives appear to have been much more important to firms than tax savings in choosing whether and to what extent to participate in the holiday. Indeed, many firms appear to have viewed the act principally as an opportunity to manage reported GAAP income, rather than as an opportunity to reduce their U.S. tax costs. [ABSTRACT FROM AUTHOR]

The paper provides a discussion of Oler et al.'s work regarding the expectations of investors that concern tax savings on the repatriations of foreign earnings under the American Jobs Creation act of 2004. Oler et al.'s results indicate that the market impounded a likely reduction in the anticipated deferred tax liability in stock price returns during the tax holiday, but does not examine what actually happened. It is suggested that for future research, the use of expected and actual repatriated funds should be explored.

The American Jobs Creation Act of 2004 allows U.S. multinational corporations to have a one year window during which then can subtract 85% of extraordinary cash dividends received from their foreign subsidiaries. The study looks into investor's assessments on how US multinational corporations will react to the temporary tax holiday. Market valuation and stock regressions were estimated to see if investors anticipate that firms with low-taxed foreign earnings will make use of this tax holiday and repatriate their foreign earnings at a noticeably low tax rate.

INTRODUCTION Accounting is often referred to as the "language of business." In addition to providing a language, it is also akin to a translation program. The corporation uses accounting principles [...], This paper is part of the perspectives of three researchers--an economist, an accountant and a lawyer--on tax policy. The domestic production activities deduction in AJCA 2004 provides a specific platform to introduce five concepts from financial accounting that affect tax policy: book income matters; tax rate changes immediately affect earnings; current tax expense does not generally equal taxes paid; accounting mixes different methods and permits management judgment; and consolidation rules differ for book and tax, complicating jurisdictional inferences.

INTRODUCTION This paper provides the perspective of an economist to an ongoing dialogue regarding how economists, accountants and attorneys can learn from one another and, thus, improve their analysis of [...], This is one of a trio of papers intended to highlight the potential gains from increased collaboration between the economists, lawyers and accountants in the tax policy community. In particular, this paper provides the view of an economist serving as a revenue estimator. In that role, five important issues/concepts are described to aid lawyers and accountants to understand how economists go about analyzing tax policy issues.

During the past few years, several high-profile U.S.-based multinational corporations have changed their tax residence from the United States to Bermuda or some other tax haven. They have accomplished these [...]

INTRODUCTION I. A TALE OF TWO SYSTEMS A. The Book-Tax Gap in Theory and Practice B. Nine Justices and the Gaping Divide II. LURKING IN THE GAP A. Tax Shelters [...], The book-tax accounting gap allows corporations to minimize their earnings for tax purposes while maximizing them in reports to investors, all within the letter of the law. Although the U.S. Treasury has reported the rising divergence between book and taxable income with alarm, scholars and policymakers have yet to consider fundamental reform. This Note proposes eliminating the book-tax divide by moving to a book-conformed system. Implementing this proposal will both cut down on rampant corporate tax sheltering and help restore the integrity of the financial accounting system.

INTRODUCTION The original purpose of the American Jobs Creation Act (AJCA), passed in 2004, was to eliminate the Extraterritorial Income provision (ETI) that had been found to be an export [...], The American Jobs Creation Act (AJCA) of 2004 eliminated the Extraterritorial Income provision (found to be an export subsidy), a change that improved economic efficiency and tax administration, as was likely the case with a number of tax shelter provisions. A provision allowing a special deduction from taxable income for manufacturing and certain other industries is likely to increase distortions and add complexity to the code. A temporary repatriation tax holiday for foreign source income is also likely to reduce revenue with little justification. Other foreign tax provisions are, however, more difficult to evaluate.

AN INTRODUCTION TO THE AMERICAN JOBS CREATION ACT The American Jobs Creation Act (AJCA) was signed into law on October 22, 2004. The heart of the bill is a repeal [...], This paper considers the international tax incentives created by the American Jobs Creation Act of 2004. The temporary dividend repatriation tax break is evaluated in the context of previous theoretical and empirical work. While this tax break is likely to lead to a surge in temporary repatriations, it is unlikely to encourage new investment in the United States. Instead, the tax break sends a confused message about the intent of the U.S. tax system and, together with the other international tax provisions in the legislation, is likely to encourage foreign investment in low--tax countries.

Purpose – In 2004, as the economy lay in stagnation, Congress searched for ways to stimulate job growth. Many members of Congress believed that high US taxes on repatriated earnings discouraged US-based multinational enterprises (MNEs) from bringing cash (in the form of dividends) home and investing those monies in the USA. As a result, Congress passed, and President Bush signed into law, the 2004 American Jobs Creation Act (AJCA), which reduced tax rates to a maximum 5.25 percent on cash repatriations to the USA over the course of a single tax year, i.e. a "tax holiday". The purpose of this paper is to explore key determinants of repatriated earnings by US multinational enterprises. Design/methodology/approach – This paper uses data collected from IRS documents between 2004 and 2008 to explore the drivers of MNE repatriations, including the AJCA tax holiday, from various countries to the USA. The paper applies a Lintner equation within a gravity model framework to estimate international liquidity flows. Findings – The results indicate that repatriations to the USA are more likely to originate in Latin America and other countries in the Western Hemisphere. Significant evidence is also found of agglomeration effects; countries with higher numbers of MNE subsidiaries were significantly more or less likely (depending on the year in question) to repatriate earnings to the USA. Originality/value – While several studies in the literature have examined the effects of the AJCA on individual firm earnings, very few studies have examined the aggregate effects of MNE repatriations in the context of the AJCA. More specifically, past studies have identified how much money flows back to the USA, but have not examined the set of countries from which most of the money flows. [ABSTRACT FROM AUTHOR]

The article discusses whether debt constraints influence the sensitivity of firms to a temporary tax holiday on repatriations under the American Jobs Creation Act (AJCA) of 2004. A study about the relation between proxies of debt constraints and firms' responses to repatriation tax holiday explained the potential of limited debt capacity to constrain repatriations when foreign operations outperform domestic operations. The study suggested variation in foreign performance between repatriating and non-repatriating companies. Two approaches to isolating debt constraint from performance are the classic instrumental variable (IV) and propensity score matching.

We examine whether U.S. multinationals' private and public debt constraints influence their responses to a temporary reduction in repatriation taxes (tax holiday). Using a sample of 421 U.S. multinationals with permanently reinvested earnings, we find that external debt constraints played an important role in determining their responses to the tax holiday. Specifically, we find that firms subject to fewer financial covenants in their private debt agreements or with greater access to public bond markets repatriated significantly more of their eligible funds. Our results suggest that U.S. multinationals with greater access to external debt markets have more flexibility to time their repatriations around a tax holiday and, as such, they are the primary beneficiaries of any tax savings. It is unlikely that these firms were the intended target of the American Jobs Creation Act (AJCA) 2004, given the stated legislative goals of directing repatriated funds toward financial stabilization and previously unfunded positive return investments. [ABSTRACT FROM AUTHOR]

The article discusses the issues surrounding the impact of the enactment of the American Jobs Creation Act of 2004 (AJCA) in the U.S. It states that the new legislation created by the Congress to address the corporations' abuse of the tax deduction system through AJCA has created new problems. It suggests that the problem can be eliminated by implementing minor fixes to the system or through the creation of a simple third party organization.

The article explores the role of taxation on foreign investments and repatriation decisions of multinational corporations in the U.S. It is argued that the current international tax system of the country negatively affects the competitiveness of firms and allows them to defer tax on earnings of foreign affiliates until the earnings are repatriated to the country. The impacts of the U.S. American Jobs Creation Act of 2004 and foreign tax credit on repatriations are also discussed.

The article focuses on the federal incentives offered by various U.S. states to the film and television production industry, their positive economic effects, and the steps to avoid international runaway productions. It discusses the impact of the American Jobs Creation Act of 2004 and the Tax Increase Prevention and Reconciliation act of 2005 on incentive programs. It also examines the incentive programs offered by California and New York and looks into their efforts to avoid losing productions to other states.

Code Section 409A, added by the American Jobs Creation Act of 2004, and recently issued guidance from the IRS state the new rules governing a broad sweep of arrangements that provide nonqualified deferred compensation (NQDC). Although the rules do not apply to certain retirement plans and welfare benefit arrangements, they do cover discount options, some stock appreciation rights and some severance plans not previously considered to be NQDC. Several commonly used NQDC techniques are outlawed, and virtually every existing plan must be modified for the future. Generous transition rules give plan sponsors an opportunity to preserve the old treatment of pre-2005 accrued and vested amounts while revamping plans to comply with the new regime before the end of this year. Now is the time to focus on the things that must be done to avoid the hefty penalties for failure to comply either in form or in substance. [ABSTRACT FROM AUTHOR]