Apple to build new campus with tax break funds

Apple will construct a new campus using cash the company plans to bring back from overseas, taking advantage of a provision included in the recent overhaul of the US tax code. 

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Apple is planning to build a new corporate campus and hire 20,000 American workers in an expansion driven in part by a tax cut that will enable the iPhone maker to bring an estimated $245 billion back to its home country.

The pledge announced Wednesday comes less than a month after Congress approved a sweeping overhaul of the United States tax code championed by President Trump that will increase corporate profits.

Besides dramatically lowering the standard corporate tax rate, the reforms offer a one-time break on cash held overseas.

Apple plans to take advantage of that provision to bring back most of its roughly $252 billion in offshore cash, generating a tax bill of about $38 billion. That anticipated tax bill implies Apple intends to bring back about $245 billion of its overseas cash, based on the temporary tax rate of 15.5 percent on foreign profits.

Apple has earmarked about $75 billion of the money currently overseas to finance $350 billion in spending during the next five years. The spree will include the new campus, new data centers, and other investments.

But most of the $350 billion reflects money that Apple planned to spend with its suppliers and manufacturers in the US anyway, even if corporate taxes had remained at the old 35 percent rate.

Analysts have also predicted that most of those overseas profits will flow into stock buybacks and dividend payments. That's what happened the last time a one-time break on offshore profits was offered more than a decade ago.

The new law lowers the corporate tax rate to 21 percent on US profits while providing a sharper discount on overseas cash this year.

Apple CEO Tim Cook is now delivering on a longtime promise to bring back most of the company's overseas cash if the taxes on the money were slashed.

Other US companies, including American Airlines, AT&T, and Comcast, have handed out $1,000 bonuses to all their workers to share the wealth they will gain from the lower rate on their domestic earnings.

Excluding banks and other financial services companies, Moody's Investors Service estimates corporate America has an estimated $1.6 trillion in overseas cash. Most of that is in the technology industry, with Apple at the top of the heap.

Mr. Trump and lawmakers are hoping companies use the money to raise wages, expand payrolls, open more offices, and invest in new equipment.

After plowing nearly $46 billion into dividends and stock repurchases in its last fiscal year, Apple is likely to funnel a big chunk of overseas money to its shareholders. But Wednesday's announcement was clearly designed to be a sign of its allegiance to the US, Apple's most lucrative market.

The public show of support also helps the optics of a company that will still make most of its iPhones, iPads, and other gadgets in factories located in China and other countries that offer cheaper labor – a practice that Trump and others have criticized.

"Apple is a success that could only have happened in America, and we always felt a very big sense of responsibility to give back to our country and the people who have made our success possible," Mr. Cook said during a ceremony Wednesday celebrating a new warehouse being built in Reno, Nev.

The White House applauded Apple's commitment.

"Just as the president promised, making our businesses more competitive internationally is translating directly into benefits for the American worker, through increased wages, better benefits, and new jobs," Lindsay Walters, White House spokeswoman, said.

Apple, which just spent an estimated $5 billion building a Cupertino, Calif., headquarters that resembles a giant spaceship, plans to announce the location of a second campus devoted to customer support later this year.

The company didn't say how big the second campus will be, or how many of the additional 20,000 workers that it plans to hire will be based there. About 84,000 of Apple's 123,000 workers currently are in the US.

One thing seems certain: Cities from across the US will likely be offering Apple tax breaks and other incentives in an attempt to persuade the company to build its second campus in their towns.

That's what happened last year after Amazon announced it would build a second headquarters in North America to expand beyond its current Seattle home. The online retailer received 238 proposals from cities and regions in the US, Canada, and Mexico. Amazon is expected to announce the winning bid later this year.

Unlike Amazon, Apple isn't openly soliciting bids from cities interested in its new campus.

This story was reported by The Associated Press.