2013 Repatriation Holiday? Big Upside in Big Tech

If cash is king, and taxes are certain, then shareholders of big cap tech companies may receive a king's ransom this year. Following the tax increases imposed on individuals, I believe President Obama has made it clear that raising additional revenue via corporate tax reform is next on the agenda. Speaker Boehner indicated the House is equally interested in advancing a corporate tax reform bill and has formally reserved the chamber’s first legislative item (H.R. 1) for tax reform. Ultimately, in order to garner industry support, such reform will likely include a repatriation holiday for foreign held cash. Management teams at many companies have addressed the need for lower tax rates before bringing foreign earned cash back to the United States. While I expect Congress to provide companies an opportunity to repatriate cash at tax rates as low as 5.25%, I believe that a passing bill will also include provisions incenting companies to use cash for reinvestment and job growth. At this point the base scenario, assumes a 65% probability of tax reform in 2013, and a 75% probability that a repatriation holiday is part of the passing bill. I expect increased chatter on the issue in 2Q13.