Berkshire Hathaway and the Base Erosion Antiabuse Tax (“BEAT”)

[John Hjorth]

So far, we have here on CoBF discussed the accounting effects to Berkshire from the US Tax Reform, as I read things, only from the perspective the cut of the US corporation tax rate from 35 percent to 21 percent.

 

Yesterday evening, I read the JPM 2017Q4 reporting, and to be absolutely honest here, it was the first time, that I paid some attention to BEAT.

 

Berkshire is shifting from being subject to a global income taxation system, to a territorial taxation system.

 

From the JPM 2017Q4 presentation, p.2 :

 

Will JPM actually repatriate cash and if so how will it be used?  No significant remittance of cash expected – we have capital and liquidity requirements in foreign entities – it is a deemed repatriation ...

 

 Do you anticipate JPM will be subject to the Base Erosion Antiabuse Tax (“BEAT”)?  Uncertain – but we do not expect any material impact from BEAT

 

From the Berkshire 2016 10-K, p. 94:

 

... We have not established deferred income taxes on accumulated undistributed earnings of certain foreign subsidiaries. Such earnings were approximately $12.4 billion as of December 31, 2016 and are expected to remain reinvested indefinitely. Upon distribution as dividends or otherwise, such amounts would be subject to taxation in the U.S. and potentially in other countries. However, U.S. income tax liabilities would be offset, in whole or in part, by allowable tax credits deriving from income taxes previously paid to foreign jurisdictions. Further, repatriation of all accumulated earnings of foreign subsidiaries would be impracticable to the extent that such earnings represent capital needed to support normal business operations. As a result, we currently believe that any incremental U.S income tax liabilities arising from the repatriation of distributable earnings of foreign subsidiaries would not be material. ...

 

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So, what are your thoughts and insights on this matter?