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In the news, we often hear about whether or not corporations should be allowed to repatriate earnings. What does that mean and what are the economics involved, what is the current accounting relating to whether or not deferred income taxes should be recorded, and if you were King/Queen for the day, would you change the current accounting and tax laws relating to this issue and if so, why.

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Repatriation is the transferal of money from a foreign currency back to its original currency. Many large companies form foreign subsidiaries transferring U.S. dollars overseas. When earnings from the foreign subsidiary are distributed, or repatriated, back to the U.S. parent through dividend payments, the payments are included on the U.S. tax return and taxed at the U.S. tax rate less credits for taxes paid to the foreign country (Graham, Hanlon, & Shevlin, 2011). If the foreign subsidiary pays no dividends to the U.S. parent company then no tax will be paid. Under Accounting Standards Codification 740-30-25 an accrual for deferred taxes should be made for the difference between the taxes due on foreign subsidiary income and the tax paid on the dividends already included on the U.S. tax return. A U.S. multinational company can defer the accrual of taxes on foreign earnings by applying the exception provided for in ASC 740-30-25-17. This exception allows the U.S. parent to designate the earnings as indefinitely invested by the foreign subsidiary. These reporting requirements along with current tax law, affects the economy from Wall Street to Main Street. It creates fewer jobs and keeps less tax dollars here at home. Current discussions are taking place regarding possible reform. The answer may be to lower the tax rate on repatriated earnings as it can help alleviate the economic impact....
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