Repatriation of earnings

On Pfizer's (PFE) fourth quarter earnings conference call, the size of PFE's "earnings repatriation" surprised me - $37 billion! Earnings repatriation has been driven by the American Jobs Creation Act of 2004 which provided U.S. corporations a one-time opportunity to repatriate foreign profits at the extraordinarily low tax rate of 5.25%.

There is a catch to this earnings amnesty: the earnings "must be invested in the U.S. pursuant to a domestic reinvestment plan..(other than as payment for executive compensation), including .. infrastructure, research and development (r&d), capital investments or the financial stabilization of the corporation for the purposes of job retention or creation."

My surprise appears well-placed. An article by Daniel S. Levine of the San Francisco Business Times reports that PFE is "by far" the leader in the repatriation of earnings. Overall, U.S. corporations are expected to repatriate $400 billion, making PFE's nearly 10% of the entire U.S. business sector. That's a huge financial resource for a company whose 2005 r&d expenses were $7.8 billion.