Is Apple the Republican Tax Plan's Biggest Winner?

The House and the Senate are getting close to reconciling their respective tax bills, with lawmakers and congressional staffers pulling all-nighters to try revise key aspects of the legislation. For instance, there have been discussions about setting the top individual tax rate at 37%, lower than the current 39.6% and down from the Senate's plan to set it at 38.5%.

Another potential revision is changing the corporate tax rate to 21% instead of the 20% proposed by both the House and the Senate and way down from the current corporate rate of 35%. President Trump initially sought a 15% rate, but then demanded it go no higher than 20%; he eventually, though, was open to a corporate rate of up to 22%.

If this bill passes, it would be a huge win for U.S. corporations, especially iPhone maker Apple AAPL . According to Richard Waters and Tom Braithwaite at the Financial Times , Apple could stand to make as much as $47 billion from the Republican tax legislation.

Here's how that number was calculated: Apple, under current tax laws, would have to shell out $78.1 billion in order to bring its $252 billion in foreign cash and investments back to the U.S. But under the Senate plan, the company would only have to pay $31.4 billion on its past overseas earnings. That difference equals a $47 billion windfall.

Apple is known for setting aside funds in case it needs to pay any potential tax bills, and it's important to note that the company would only receive this multi-billion-dollar windfall if it chose to move the $252 billion it has stashed overseas and after it pays the U.S. government billions of dollars in taxes.

This "in case of emergency" tax fund, in addition to the fact that Apple is the most valuable company in the world, is why the Times decided to focus on the company for its analysis.

Taking a look how Apple and CEO Tim Cook would use this repatriated money is also important. Members of the GOP claim that companies who bring back profits from overseas will boost U.S. tax revenue and benefit the economy by creating jobs, but the company would likely put this money into stock buybacks and dividends for their shareholders instead.

Apple, of course, is not only the company that could significantly benefit from the tax bill. PC leader Microsoft MSFT also holds a good chunk of profits overseas-around $132 billion-but Apple stands to gain the most, as it has nearly double that profit amount overseas.

While these numbers are based on the Senate's plan of a 20% corporate rate, the eventual profit amount Apple could reap is huge. "Overall, companies like Apple will be happy with [the bill]. They are a getting a territorial system and a lower rate. It's a good deal," Villanova University tax professor Richard Harvey told the Times .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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