IDEAS home Printed from https://ideas.repec.org/a/ibf/acttax/v13y2021i1p15-30.html
   My bibliography  Save this article

Impact Of The 2017 Tax Cuts And Jobs Act On Foreign Cash Holdings Of U.S. Multinational Corporations

Author

Listed:
  • Herman Manakyan
  • Ani Mathers

Abstract

U.S. Multinational Corporations (MNCs) generate significant amounts of income in foreign countries through their international affiliates and subsidiaries. Prior to 2018, this income was subject to U.S. taxation only when repatriated to the U.S., creating an incentive for those firms to retain these earnings in their foreign subsidiaries and leading to the accumulation of large amounts of cash held by U.S. corporations outside of the U.S. The Tax Cuts and Jobs Act (TCJA), which was signed into law by President Trump on December 22, 2017, changed the corporate taxation of U.S. MNCs to a territorial system and created an immediate tax liability for U.S. MNCs’ deemed repatriation of their past foreign earnings. A primary objective of the change in the corporate tax structure was to encourage repatriation of accumulated foreign cash, as well as to eliminate the incentives to accumulate cash in foreign jurisdictions. This study examines the impact of the tax law changes on cash transactions and cash holdings of U.S. MNCs. Our results indicate a major policy goal of TCJA was largely accomplished, resulting in U.S. MNCs repatriating significant amounts of accumulated foreign cash, as well as reducing the future retention of earnings in foreign jurisdictions.

Suggested Citation

  • Herman Manakyan & Ani Mathers, 2021. "Impact Of The 2017 Tax Cuts And Jobs Act On Foreign Cash Holdings Of U.S. Multinational Corporations," Accounting & Taxation, The Institute for Business and Finance Research, vol. 13(1), pages 15-30.
  • Handle: RePEc:ibf:acttax:v:13:y:2021:i:1:p:15-30
    as

    Download full text from publisher

    File URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v13n1-2021/AT-V13N1-2021-2.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Multinational Corporations; Tax Cut and Jobs Act; Foreign Cash; Trapped Cash;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibf:acttax:v:13:y:2021:i:1:p:15-30. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mercedes Jalbert (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.