Apple Planning to Raise Reported $5 Billion in Bond Sale [Updated]

[MacRumors]

Apple today filed a prospectus with the Securities and Exchange Commission, hoping to sell $5 billion worth of new debt according to reports.

Managed by Goldman Sachs and Deutsche Bank, the offer's monetary specifics haven't yet been revealed by Apple, but the company says the money will be used to cover "general corporate purposes, including repurchases of our common stock and payment of dividends under our program to return capital to shareholders, funding for working capital, capital expenditures and acquisitions and repayment of debt."

As Bloomberg's Lisa Abramowicz points out, much of the proceeds the company receives from the bond sale are undoubtedly going to buybacks and dividend payments.

Except for rewarding shareholders, of course. Proceeds to go to buybacks & dividend payments - Lisa Abramowicz (@LisaAbramowicz1) February 2, 2015

This follows the company's previous bond sale last November, where Apple notably began issuing bonds in euros. That sale saw Apple looking to raise EUR2.8 billion ($3.5 billion) for the usual "general corporate purposes," again primarily share buybacks and dividend payments.

Today's prospectus comes on the heels of the company's record-breaking earnings for the first fiscal quarter of 2015, posting revenue of $74.6 billion in the quarter, and subsequently seeing a noticeable bump in shares of its stock when the market opened last Friday.

While the company holds roughly $178 billion in cash and marketable securities, much of that cash is held outside of the United States and would currently be subject to significant taxes if brought back to the U.S. to be used for stock buybacks and dividends. As a result, Apple has been pursuing bond sales at very favorable interest rates as a cheaper means of funding these initiatives, repaying the bonds from ongoing operations over time.

Update Feb 3 4:52 PT: The Wall Street Journal reports that Apple has increased the size of its bond deal to $6.5 billion.

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

Article Link: Apple Planning to Raise Reported $5 Billion in Bond Sale [Updated]

 

[wolfaaron]

I can't wait until they start scrambling all of their cash to get it back home when the White House passes the Bill taxing at a 14% rate any money kept overseas. These greedy companies love it when the tax payer bails them out or when they help them with their infrastructure. But when it's their turn to pay their taxes, theyre good at hiding it.

 

[2457282]

I can't wait until they start scrambling all of their cash to get it back home when the White House passes the Bill taxing at a 14% rate any money kept overseas. These greedy companies love it when the tax payer bails them out or when they help them with their infrastructure. But when it's their turn to pay their taxes, theyre good at hiding it.

Well, I dont understand your logic. If the bill doesnt pass, Apple keeps their money in other countries and pays a total tax of ZERO. Passing the bill entices Apple to bring the money to the US and pays a tax of 14%. Seems like the taxpayer wins here. How do they win if they keep the tax high but get no revenue since the company will not repatriate?

 

[Shadow Runner]

Apple is not being "greedy" (or any company) they are doing what they need to to stay competitive. The U.S. government needs to change to allow companies to bring money and business back into the country favorably. It's a global economy and the U.S. just needs to stay competitive.

 

[SoAnyway]

Lowering taxes in order to "stay competitive" is nothing more than a race to the bottom.

Companies like Apple need to pay the country that they base themselves out of, use its resources, and proudly call home no matter if the money is made overseas. Not doing so only cheats the US tax payer on top of the subsidies the already enjoy.

 

[ArtOfWarfare]

I can't wait until they start scrambling all of their cash to get it back home when the White House passes the Bill taxing at a 14% rate any money kept overseas.

You're very confused if you think the White House passes bills. Obama proposed a bill, but given neither house of Congress is held by Democrats, I doubt there will be any traction on it. It's nothing but rhetoric and politics from Obama.

 

[carrrrrlos]

That Apple Spaceship isn't going to pay for itself.

 

[Chupa Chupa]

I can't wait until they start scrambling all of their cash to get it back home when the White House passes the Bill taxing at a 14% rate any money kept overseas. These greedy companies love it when the tax payer bails them out or when they help them with their infrastructure. But when it's their turn to pay their taxes, theyre good at hiding it.

Since when does the executive branch pass bills? My copy of the U.S. Constitution says Congress passes bills and the president can either sign or veto.

And the 14% isn't the final#. Even the WH said it's a "starting point" for negotiation w/ Congress. IF their is an agreement it's likely to be 10% or below. But there are many in Congress who want comprehensive corporate tax reform, not piecemeal and won't agree on any % unless it's part of a complete modernization effort.

 

[IJ Reilly]

Since when does the executive branch pass bills? My copy of the U.S. Constitution says Congress passes bills and the president can either sign or veto.

And the 14% isn't the final#. Even the WH said it's a "starting point" for negotiation w/ Congress. IF their is an agreement it's likely to be 10% or below. But there are many in Congress who want comprehensive corporate tax reform, not piecemeal and won't agree on any % unless it's part of a complete modernization effort.

Everybody in Washington says comprehensive tax reform is an urgent necessity, yet they have been saying this for years without doing anything.

----------

You're very confused if you think the White House passes bills. Obama proposed a bill, but given neither house of Congress is held by Democrats, I doubt there will be any traction on it. It's nothing but rhetoric and politics from Obama.

It's all rhetoric and politics from everybody, period, full stop.

 

[ptb42]

If the bill doesnt pass, Apple keeps their money in other countries and pays a total tax of ZERO.

No, Apple pays the other country's taxes. So, their total tax would not be zero.

However, but if you meant they would pay zero total US federal taxes, I agree with you.

 

[Dimwhit]

Companies like Apple need to pay the country that they base themselves out of, use its resources, and proudly call home no matter if the money is made overseas. Not doing so only cheats the US tax payer on top of the subsidies the already enjoy.

So they should pay taxes in those overseas companies AND here in the U.S.? What about that seems fair? Sounds like cheating the company to me.

 

[Rocketman]

The President's plan to retroactively tax income earned overseas contrary to current tax law is rightly DOA. His plan to double tax as hard as possible with taxes on dead people, dividends, capital gains, and even college funds are also DOA.

The proper course to improve employment and growth is to lower rates, broaden the base and reduce so-called "tax expenditures" which is another word for deductions and credits.

It would be even better to eliminate corporate and company taxation entirely and make all taxes income taxes before a policy is implemented to financially manage the elimination of taxes entirely. I know how, but all good ideas go to DC to die.

Apple could simply buy Apple stock with most of its foreign cash holdings and have the foreign companies buy some major investment in an Apple project payable in shares, then retire them with no further cash outlay or taxation at all. About the only thing big enough would to be to buy about 1/3 of the S&P companies outright.

Or provide nearly free transportation systems inside all major U.S. cities. That would lower the carbon footprint of the U.S. by a VERY large amount, eliminate dependence on foreign oil permanently, eliminate traffic jams, and reduce pollution substantially. I know how, but all good ideas go to DC to die. That's why someone with the scale of Apple should do it so it is private property. Walt Disney wanted to but the government refused to let him.

Rocketman

cite:

http://www.reuters.com/article/2015/02/01/us-usa-budget-tax-idUSKBN0L51IX20150201

In his budget plan to be unveiled on Monday, Obama will call for a one-time, 14 percent tax on an estimated $2.1 trillion in profits piled up abroad over the years by multinationals . . .

 

[SarcasticJoe]

No, Apple pays the other country's taxes. So, their total tax would not be zero.

However, but if you meant they would pay zero total US federal taxes, I agree with you.

They doge foreign taxes as well...

For example their European profits are routed to a subsidiary in Ireland and it was recently unearthed they they had a secret tax deal with the government where they only paid 2% tax on their earnings. At 16% Ireland has already a considerably lower corporate tax rate than most European countries (here in Finland it used to be 24%, but they recently lowered it to 20%), but that was so serious the EU is forcing Ireland to end those tax deals over a 2 year period. Thus we can be pretty sure that their profits are going to the Cayman islands, where they're paying no tax whatsoever, next.

 

[jonnysods]

Does this mean we get our stocks increased again?

 

[Gary03mw]

Well, I dont understand your logic. If the bill doesnt pass, Apple keeps their money in other countries and pays a total tax of ZERO. Passing the bill entices Apple to bring the money to the US and pays a tax of 14%. Seems like the taxpayer wins here. How do they win if they keep the tax high but get no revenue since the company will not repatriate?

Right now, if Apple were to repatriate the cash they would pay their normal corporate rate which is around 30%. I think he's trying to say that if that rate were lowered to 14% then Apple would be getting a 16% discount on the taxes they are supposed to pay.

I don't personally agree with his line of thinking, but just trying to explain what he meant.

Apple is not being "greedy" (or any company) they are doing what they need to to stay competitive. The U.S. government needs to change to allow companies to bring money and business back into the country favorably. It's a global economy and the U.S. just needs to stay competitive.

Exactly

Lowering taxes in order to "stay competitive" is nothing more than a race to the bottom.

Companies like Apple need to pay the country that they base themselves out of, use its resources, and proudly call home no matter if the money is made overseas. Not doing so only cheats the US tax payer on top of the subsidies the already enjoy.

I just want to make a couple of points about this line of thinking...

1. What's to stop Apple from not basing themselves in America? Tax inversions have already become fairly common.

2. Apple doesn't really get a lot of subsidies. They are taxed by the US government around 30% on profits made inside the US. Not to mention that the US has one of the highest corporate tax rates in the world.

3. There are exceptions, but Apple pays tax in the country the product was sold. Apple is avoiding some of these taxes, but it is those countries that need to be concerned about collecting their money; not the US.

4. US companies have nearly 3 trillion dollars stored offshore. It's not just Apple, these companies aren't anti american, and they are using common sense. Why would you bring the money back to the US if you didn't currently need the money, if you could reinvest the money in the country where the money was made, or if you can borrow money at much lower rates? The tax system can be and needs to be redone where it makes sense for companies to bring money back. A lower rate benefits everyone. It benefits the companies because they would have greater access to cash and they could be more competitive globally. It benefits the American people because the free flow of cash would result in the offshore money being taxed and hopefully the growth of the companies would result in more jobs for Americans.


I'm not saying that Apple should be paying 2% to repatriate the money, but I am saying that it needs to be a rate that it makes sense for all these companies to bring the money back. We can't get mad at them for using common sense.

 

[2457282]

No, Apple pays the other country's taxes. So, their total tax would not be zero.

However, but if you meant they would pay zero total US federal taxes, I agree with you.

That is what I meant, thanks for the clarification.

----------

Right now, if Apple were to repatriate the cash they would pay their normal corporate rate which is around 30%. I think he's trying to say that if that rate were lowered to 14% then Apple would be getting a 16% discount on the taxes they are supposed to pay.

I don't personally agree with his line of thinking, but just trying to explain what he meant.

I did understand what he was saying, but I was disagreeing. Apple would not be getting a discount since they will not their money back to the US at the 30% rate. It would only be a discount if they were already bringing money back to the US and paying the 30%. At that point lowering the tax would be a discount. The reality is as you pointed out - there are trillions of dollars outside the US that will not come back at 30%. If the US wants some additional revenue, lowering the cost will bring some of the money back. The balancing act is how low do you need to go. If you go too low you could be leaving money on the table, if you dont go low enough you have lost revenue because money does not come back. 30% is clearly in the not low enough, so we are losing revenue at this point. going to 2% would be too low as I think we could see a lot of money coming back at 10-15%.

 

[giantfan1224]

Lowering taxes in order to "stay competitive" is nothing more than a race to the bottom.

Companies like Apple need to pay the country that they base themselves out of, use its resources, and proudly call home no matter if the money is made overseas. Not doing so only cheats the US tax payer on top of the subsidies the already enjoy.

Apple pays all applicable taxes with their associated U.S. operations, including employment, local and other taxes.

 

[stars_fan]

You're very confused if you think the White House passes bills. Obama proposed a bill, but given neither house of Congress is held by Democrats, I doubt there will be any traction on it. It's nothing but rhetoric and politics from Obama.

Well said. The sad part is these people are voting and they have no idea how the system works.

 

[IJ Reilly]

So they should pay taxes in those overseas companies AND here in the U.S.? What about that seems fair? Sounds like cheating the company to me.

They don't. Companies get a credit for foreign taxes paid, and at most, pay the difference. The issue is companies funneling earnings through tax havens, such as Ireland, where they pay essentially no taxes.

----------

They doge foreign taxes as well...

For example their European profits are routed to a subsidiary in Ireland and it was recently unearthed they they had a secret tax deal with the government where they only paid 2% tax on their earnings. At 16% Ireland has already a considerably lower corporate tax rate than most European countries (here in Finland it used to be 24%, but they recently lowered it to 20%), but that was so serious the EU is forcing Ireland to end those tax deals over a 2 year period. Thus we can be pretty sure that their profits are going to the Cayman islands, where they're paying no tax whatsoever, next.

Precisely. The tax havens are the elephants in the room that nobody really wants to discuss. Also, few U.S. corporations pay anywhere close to the corporate tax rack rate as the tax code is loaded with tax avoidance methods, aka, loopholes.

 

[cyb3rdud3]

I'd rather have a small percentage of a lot, than a large percentage of nothing. Government around the world need to think globally and compete for the business to get the income.

 

[ptb42]

They doge foreign taxes as well...

For example their European profits are routed to a subsidiary in Ireland and it was recently unearthed they they had a secret tax deal with the government where they only paid 2% tax on their earnings. At 16% Ireland has already a considerably lower corporate tax rate than most European countries (here in Finland it used to be 24%, but they recently lowered it to 20%), but that was so serious the EU is forcing Ireland to end those tax deals over a 2 year period. Thus we can be pretty sure that their profits are going to the Cayman islands, where they're paying no tax whatsoever, next.

It's not a "doge" if it's legal.

Ireland offered them that deal, because 2% of Apple's profits was better than 100% of no profits at all.

Individual and corporations "shop" for the lowest cost of everything. You may be willing to pay a higher price for something, in exchange for something else of value to you. But, you can't expect someone else to do it, unless it is also in their self-interest.

Any "fault" for the tax deal lies with Ireland. But as I noted above, it was a good deal for them -- because they received tax revenue that would have gone elsewhere. So, it was in Ireland's self-interest to offer the deal, and Apple's self-interest to take it.

The Cayman Islands rely on indirect taxes, rather than direct taxes such as income tax or capital gains taxes.

http://en.wikipedia.org/wiki/Cayman_Islands#Taxation

Again, this is in the self-interest of the Cayman Islands. So, you shouldn't be surprised when someone (individual or corporation) takes advantage of it. Their bank secrecy is in the past (largely to combat money laundering), and income is reported to the individual's home countries.

In the US, an individual's foreign income is taxable, although foreign taxes can be credited. Taxes on a business' foreign profits are deferred until they are "repatriated". Since the US corporate tax rate is about 40% (a combination of federal and average state corporate tax rates) -- the highest in the developed world -- there is a significant disincentive to repatriate those profits.

If that rate was something closer to the average, US companies would be more willing to repatriate those profits. Since there is a credit for foreign taxes paid, the additional levy would be relatively small (if not zero). But, it would be more helpful to lower it permanently, rather than offer a one-time reduction that expires.

 

[ptb42]

Also, few U.S. corporations pay anywhere close to the corporate tax rack rate as the tax code is loaded with tax avoidance methods, aka, loopholes.

These "loopholes" are for things the US (and state) government has chosen to provide incentives, for various reasons. It's reasonable to argue that some of them are too generous, or no longer needed. But, it's not reasonable to argue that a corporation shouldn't take advantage of every possible one: it's their duty to shareholders.

There are also many tax credits and deductions for individuals, ranging from mortgage interest deductions, energy-efficiency credits, and incentives to save/invest. These are also "tax avoidance" methods, or "loopholes", and account for far more reduction in tax revenue than corporate tax reductions. Of course, an individual may choose to forgo them, but that's your choice. Or, you can just write a check to the Bureau of the Public Debt.

However, simply complaining about the tax rate paid by a specific company, in isolation from the factors that affected their taxable income, is demagoguery. In one notable example, a company paid no income taxes on a significant amount of profits, because they carried over huge losses from previous years. If you owned stocks (outside an IRA/401K) in 2006, it's likely that your or your accountant did the same thing for you. If you lost $90,000 last year, but gained $100,000 this year: should you pay taxes on $10,000 or $100,000?

The other source of demagoguery is "most corporations don't pay ANY income taxes". This may be true, but it's an oversimplification -- because it doesn't account for the many legitimate reasons that may occur. For instance, my company doesn't pay any "corporate" income taxes, because all of the income is transferred to my personal income tax return, where we pay personal income taxes.

 

[bossxii]

Federal US tax law should be about this long...

Federal Taxes for Individuals or Business - 15%

Flat tax and the 1%er's would reduce our deficit rather handily. Small business would not suffer the 42% tax rates and be able to afford to expand, hire more employees etc... Big business would finally actually pay taxes, which would be Billions.

 

[IJ Reilly]

These "loopholes" are for things the US (and state) government has chosen to provide incentives, for various reasons. It's reasonable to argue that some of them are too generous, or no longer needed. But, it's not reasonable to argue that a corporation shouldn't take advantage of every possible one: it's their duty to shareholders.

There are also many tax credits and deductions for individuals, ranging from mortgage interest deductions, energy-efficiency credits, and incentives to save/invest. These are also "tax avoidance" methods, or "loopholes", and account for far more reduction in tax revenue than corporate tax reductions. Of course, an individual may choose to forgo them, but that's your choice. Or, you can just write a check to the Bureau of the Public Debt.

However, simply complaining about the tax rate paid by a specific company, in isolation from the factors that affected their taxable income, is demagoguery. In one notable example, a company paid no income taxes on a significant amount of profits, because they carried over huge losses from previous years. If you owned stocks (outside an IRA/401K) in 2006, it's likely that your or your accountant did the same thing for you. If you lost $90,000 last year, but gained $100,000 this year: should you pay taxes on $10,000 or $100,000?

The other source of demagoguery is "most corporations don't pay ANY income taxes". This may be true, but it's an oversimplification -- because it doesn't account for the many legitimate reasons that may occur. For instance, my company doesn't pay any "corporate" income taxes, because all of the income is transferred to my personal income tax return, where we pay personal income taxes.

I didn't comment in any way, shape or or form about whether a company or anyone else should take advantage of gimmies in the tax code. If you look at what I actually said (why oh why is saying this even necessary?), I simply pointed out a plain, simple fact: few U.S. corporations pay the corporate tax rate that so many are fond of citing as though everyone does.

The rest of your reply also does not follow from anything I actually said. You might look in the dictionary under "demagoguery;" I suspect you will find a picture of yourself.

 

[groovyd]

Couldn't the government just require taxes on the off shores cash at the current rate and basically say f you to the companies? Would really help fund all the infrastructure issues that are badly needed across the country, for example roadways and bridges.