Florida's largest companies are holding at least $9.4 billion in foreign profits, shielding the earnings from U.S. income taxes, according to an Orlando Sentinel review of financial statements.
And the amount is growing: The Sentinel's review found that the Florida companies added $1.2 billion to their offshore holdings during their most recent fiscal year, a 15 percent increase from their prior fiscal year.
The maneuvering, which is entirely legal, has saved the companies hundreds of millions of dollars in federal and state income-tax payments.
The Florida businesses cover a broad industrial spectrum. They range from St. Petersburg-based electronics manufacturer Jabil Circuit Inc., which has accumulated $1.8 billion in offshore profits on which it has not paid any U.S. tax, to Miramar cosmetics company Elizabeth Arden Inc., which has parked $270 million in foreign subsidiaries.
The list includes three companies based in Central Florida — defense contractor Harris Corp., plastics seller Tupperware Brands Corp. and time-share developer Marriott Vacations Worldwide Corp. — that are holding a combined $1.4 billion in foreign earnings.
American companies are supposed to pay U.S. taxes on income they earn in other countries. But they have to do so only when their international subsidiaries return the money, or "repatriate" it, to their U.S. parent.
So companies can defer paying U.S. taxes simply by keeping the earnings in their subsidiaries and telling the Internal Revenue Service that they intend to indefinitely reinvest the money. They can even have their international subsidiaries store the profits in U.S. bank accounts and still not pay U.S. tax on it.
Untaxed foreign profits have become one of the deepest sinkholes in the tax code. Congress' Joint Committee on Taxation estimates that U.S. multinationals are avoiding about $40 billion a year in taxes by deferring payments on foreign profits. That's expected to balloon to more than $60 billion annually within five years.
The state of Florida, which begins with the federal tax code when setting its own, loses even more.
Altogether, U.S. multinationals have accumulated an estimated $2 trillion in undistributed foreign profits, an amount that has roughly doubled during the past five years. General Electric Co. alone has $108 billion in untaxed profits abroad.
"There is no prospect of corporate-tax reform without resolving this issue," said Edward Kleinbard, a University of Southern California law professor and former chief of staff for the Joint Committee on Taxation.
To determine how much Florida companies are holding in foreign profits, the Sentinel reviewed annual financial statements for 50 publicly traded companies. All are headquartered in this state, and each of them generated approximately $1 billion or more in sales during its most recent fiscal year.