Pharmaceutical firm Johnson & Johnson has announced in a regulatory filing with the SEC that it will repatriate $11 billion in earnings held overseas as a result of the one-year tax break under the American Jobs Creation Act 2004.
The new legislation, passed by Congress in October of last year, ushered in a series of new tax breaks in an attempt to stimulate domestic investment. One of the most significant of these was a one-year ‘tax holiday’ for US firms, allowing them to transfer earnings from foreign operations back to the United States and pay income tax at 5.35% instead of 35%.
The repatriated funds must be used in job creation and domestic investment activities. Analysts have estimated that around $518 billion in foreign earnings could qualify for the tax break, although expert opinion is split on the measure’s likely effectiveness in encouraging investment within the US.
Johnson & Johnson has a reported $14.8 billion in undistributed foreign earnings.
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