How U.S. companies could mend America’s crumbling infrastructure with overseas cash
Published: Oct 5, 2016 12:27 p.m. ET
S&P argues for companies to invest 15% of overseas cash in infrastructure bonds
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A boat passes the scene of a bridge collapse near Mount Vernon, Wash.
By
CIARA
LINNANE
CORPORATE NEWS EDITOR
Would U.S. companies holding wads of cash overseas be more likely to bring it home if, instead of facing steep corporate tax rates, they could invest part of the money in bonds and help mend America’s crumbling infrastructure?
Standard & Poor’s believes they would, and it argued in a new report Wednesday for a program that would allow companies repatriate the more than $2 trillion parked overseas on a tax-free basis, in return for committing 15% of it to investments in interest-bearing infrastructure bonds that would be issued by state and local governments.
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“There is bipartisan support, including from the presidential candidates, to address our country’s infrastructure problems, but there is little consensus on how to fill the huge gap between what the government can finance and how much money is needed to pay for these projects,” Beth Ann Bovion, U.S. chief economist at S&P Global Ratings. “Private capital can be part of the solution.”
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There is also bipartisan agreement that the nation’s infrastructure is in dire straits, with bridges and roads in need of repair and water systems in desperate need of upgrading. The issue is best illustrated by the crisis in Flint, Mich., where up to 12,000 children are at risk from a range of health problems after being exposed to drinking water with high lead levels.
Read: America’s water crisis is way bigger than Flint
Companies such as Apple Inc. AAPL, +0.12% have been holding enormous sums overseas for years, and Apple’s chief executive, Tim Cook, has been vocal about his refusal to repatriate those funds as long as the U.S. corporate tax rate remains at 35%.
Apple ordered to pay $14.5 billion Irish tax bill(1:41)
The European Commission has demanded that Ireland recoup roughly €13 billion ($14.5 billion) in what it claims are unpaid taxes from Apple. Both Apple and Ireland said they would appeal.
Apple has the most cash outside the U.S. of any U.S. company, at more than $200 billion. The company has repeatedly issued bonds to raise the funds to finance large returns to shareholders, as low borrowing rates make that process less costly than repatriating money from abroad.