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Tax reform puts pressure on foreign earnings assertions

Tammy Whitehouse | October 2, 2018

A change in U.S. tax law with respect to foreign earnings produces a swamp of reporting and strategy issues for companies to consider around historic financial statement assertions that those earnings are indefinitely reinvested overseas.

The Tax Cuts and Jobs Act made it clear that companies could no longer escape the consequences of U.S. corporate income tax on their foreign earnings by asserting that those earnings are being held in offshore locations and retained there for investment purposes. Now they must decide what to do with that assertion going forward under a new tax landscape.

Historic tax policy gave companies good reason to avoid bringing foreign earnings back to the United States. The longtime corporate tax rate of 35 percent, high compared with other countries, was not levied on foreign earnings unless or until those earnings were repatriated,...

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