It is difficult to determine whether a corporation’s cash is held at home or abroad, but we know that significant holdings of cash are concentrated at large multinational firms. In particular, the Board staff’s analysis (of Standard & Poor’s Compustat data) indicates that the ratio of cash to total assets at domestic-only companies rose slightly less than 20 percent between year-end 2001 and 2004. At the same time, the cash intensity of balance sheets at multinational companies increased more than 50 percent. Moreover, recent research has demonstrated a strong statistical link between the accumulation of cash and the estimated tax burden from repatriating foreign earnings (Hartzell, Titman, and Twite, 2006).
As a means of unlocking those offshore cash holdings, the Congress and the President provided U.S. companies a one-time opportunity--through the American Jobs Creation Act of 2004--to repatriate foreign profits at a much reduced statutory tax rate. Indeed, Wall Street estimates indicate that many companies have capitalized on this opportunity: An extra $250 billion may have been repatriated during the past four quarters. That estimate appears consistent with the recent pattern of distributions from foreign income reported in the Commerce Department’s international transactions data.