Returning Overseas Cash, Apple Will Pay $38 Billion Tax Bill

Apple said it will bring hundreds of billions of overseas dollars back to the U.S., pay about $38 billion in taxes on the money and spend tens of billions on domestic jobs, manufacturing and data centers in the coming years, according to Bloomberg.

The company plans capital expenditures of $30 billion in the U.S. over five years and will create 20,000 new jobs at existing sites and a new campus it intends to open. “We are focusing our investments in areas where we can have a direct impact on job creation and job preparedness,“ CEO Tim Cook said in the statement, which alluded to unspecified plans by the company to accelerate education programs. Apple also told employees that it’s issuing stock-based bonuses worth $2,500 each following the new U.S. tax law, according to people familiar with the matter.

In its December approval of the most extensive tax-code revisions since 1986, Congress scrapped the previous international tax system for corporations, an unusual arrangement that allowed companies to defer U.S. income taxes on foreign earnings until they returned the income to the U.S. That “deferral“ provision led companies to stockpile an estimated $3.1 trillion offshore. By switching to a new system, tax writers also imposed a two-tiered levy on that accumulated foreign income: Cash will be taxed at 15.5 percent, less liquid assets at 8 percent. Companies can pay over eight years.

Apple is the first major U.S. technology company to act on the new tax law and it joins others in responding to criticism by President Donald Trump and others that corporations have been ignoring American workers and manufacturing. Job creation was a key pillar of Trump’s election campaign. That means the new positions created by Apple are likely to have more political impact than $38 billion tax payment.

Apple has the largest offshore cash reserves of any U.S. company, with about $252 billion at the end of September, the most recently reported fiscal quarter. The tax rate indicates that Apple is likely bringing back a majority of its overseas cash back to the U.S., leaving only a small portion for international investments like retail stores.

The $30 billion in capital expenditures will come as part of $350 billion that Apple expects to spend in the U.S. over the next five years. The 20,000 new jobs include additional Apple employees at its campuses, data centers, and retail stores. Apple said that part of the $30 billion in capital expenditures will go toward a new U.S.-based campus, new data centers and additional supplier investments.

Apple said it will increase its local manufacturing fund, announced last year, from $1 billion to $5 billion, indicating that it will be sourcing more components for its products domestically. As part of the original fund, Apple invested in Corning and Finisar, companies that make components for iPhone glass screens and lasers for Face ID and AirPods, respectively.