The repatriation rules will change the way Apple manages its cash, analysts said. Companies now have to pay a one-time 15.5 percent tax on their overseas cash to bring it back.
After that, companies will pay 21 percent tax on U.S. profits and a minimum 10.5 percent tax on foreign profits, but they will be able to deduct foreign taxes already paid on those profits, so in many cases the foreign profits can be brought home with no additional U.S. taxes paid.
At 15.5 percent, Apple would owe about $39.1 billion on its $252.3 billion in overseas cash. Unlike many other large companies, Apple has already set aside $36.3 billion for that purpose.
With the remaining cash, Apple could attack its $97 billion in long-term debt, much of which it has used to fund its dividend and share buy-back program.
“The (foreign cash) overhang for Apple is just an enormous issue,” Kleinbard said. “Even Apple has finite borrowing capacity. This removes the issue.”
This whole thing is fascinating just given the amount of capital Apple (and others) have stowed away overseas over the years. Once Apple pays their (substantially reduced) tax and pays off (at least some of) their debt, what are they going to do with all the money? (And it could be even more.)
Undoubtedly, a lot will go towards boring dividends and share buybacks. But that can't be all of it. Do they make a massive acquisition? (Probably not. But come on!) Do they invest it all in infrastructure (more likely, but they already have enough capital to do that). Content? (Again, a small piece!) It really is incredible just how much money Apple prints each quarter. And that's not going to stop. Maybe it's time to become a bank...