Treasury Dept. explains use of tax break
WASHINGTON (AP) -- Companies thinking about using a new, temporary tax break to cut their tax bills on profits earned abroad can now turn to Treasury Department guidelines that explain how to use the profits brought home.
A law passed last fall gives companies a one-year window to reduce the tax rate on money earned in foreign countries and brought back into the United States from as much as 35 percent to 5.25 percent if the money is reinvested at home.
Companies must create a reinvestment plan to qualify for the tax break, a process detailed in the guidelines released Thursday. The Treasury Department said that some qualified uses include hiring and training workers, making capital investments, research and development, financial stabilization and advertising and marketing.
Companies cannot use the money for executive compensation, paying dividends to shareholders, buying back stock or paying taxes, among other things.
Margie Rollinson, an international tax expert at Ernst & amp; Young, said companies will be happy to see they can use some money to pay off debts as part of a financial stabilization program.
"There will be lots of people who are disappointed that stock buybacks are not included," she said.