Characteristics of American success such as doing things quickly and traveling at the "speed of business" will soon occupy The White House. Hopefully, President Donald Trump will demand real action from all of Washington, D.C., and perhaps start with the mandate that results matter and the golden rule that "revenue solves all problems." Stranded overseas profits are estimated at $2.7 trillion dollars. Getting it back could create 5 million jobs. These are undeniably meaningful numbers to every American. Here is a plan to get this money back quickly.
Since the Trump administration will face all forms of resistance, speed and choice will be critical. Speed means strict deadlines within the first 100 days. Choice means two choices. Importantly, repatriation must stand alone. It will die if married to "more comprehensive" tax reform legislation.
The imperative of speed also means elite personnel armed with significant authority - a dozen dedicated teams consisting of one special agent from Commerce, Treasury, and the U.S. Marshals Service - the "2017 Repatriation Task Force." Their mandate will be to facilitate seamless repatriation of overseas funds via wire transfer through the Federal Reserve, netting the tax to Treasury and forwarding the remainder.
Speed also dictates minimal paperwork - a one-page form. Call it Repatriation Tax Form One or "RTF-l." The figures, calculations and executive certifications will fill the front; line-by-line instructions on the back. Estimated time to prepare is four hours or less including three to consider the choices and one to complete the form.
If done efficiently, the rewards will be significant. The penalty for violation would also be swift. In this instance, forfeiture of the entire remaining balance of repatriated funds. The threat of ultimate forfeiture, or an example made of one bad actor, will secure compliance among all others. For example, if Company X repatriated $10 billion at 10 percent and subsequently reneged on promises for redeployment, the forfeiture of $9 billion would deter others.
Choice is next, meaning just two choices, two tax rates and consequences. Choice is required because netting taxes from wire transfers and restrictions on redeployed funds will spark a national outcry in boardrooms over fiduciary duty to stakeholders and government overreach. Choice will clarify. Choice provides the rationale company leaders require to explain their actions.
In this proposal, a public or private company taxpayer may choose between two options. Option 1 is restricted, and Option 2 is unrestricted. Under Option 1, restricted means certifying to reinvest the net balance of repatriated funds within 90 days of receipt, as follows: (a) domestic jobs retraining for existing workforce, (b) domestic capital expenditures and (c) domestic R&D undertaken in domestic facilities.
The bargain for choosing Option 1 is a lower 10 percent tax rate. Option 2 comes without the redeployment restrictions but a higher rate of 15 percent. The rationale for Option 2 is to temper the outcry over fiduciary duties to shareholders, government strongarming, etc. In choosing the higher 15 percent rate, company leaders may overcome scorn and shareholder resistance by explaining their reasons for selecting Option 2 including freedom and flexibility.
Finally, the veracity of the RTF-l will be certified by the two highest executive officers. This process is well-known to public company officers since it is required in every financial report filed with the U.S. Securities and Exchange Commission. Private company taxpayers will be introduced to certification. All taxpayers will stand behind their certifications under penalty of perjury and the potential extreme consequence of 85 percent to 90 percent forfeiture.
The RTF-l form would be available on the Treasury's website Feb. 10. Beginning Feb. 20, a taxpayer may submit its RTF-l within its designated time frame over the next 120 days based on company name in alphabetical sequence.
Speed, choice and consequences are indispensable to any repatriation proposal. No one should underestimate patriotism in the business community, but trust yet verify is effective. Recall that in 2008 adding capital to big banks failed because there were no restrictions on the handout of billions of dollars. The banks did not lend; instead, they opted for buybacks and dividends. Their actions contributed to years of flat GDP growth. Here, a reasonable net tax recovery to Treasury and 2.7 trillion reasons provide an incentive to avoid previous mistakes.
All public and private companies may initiate their RTF-1 request alphabetically in three monthly segments between Feb. 20 and May 20. Most media reporting has covered the estimated sums public companies are holding overseas. But it would be naive and unfair to leave out private companies also squiring money offshore. America's finest private companies are equally savvy with tax planning of foreign source profits. Thus, all private companies may also report alphabetically and initiate their form RTF-1 between Feb. 20 and May 20.
Donald G. Ezzell is an energy executive, investment trustee and business lawyer in Denver. Email: email@example.com.