In 2004, the U.S. Congress passed the “American Jobs Creation Act” which allowed a U.S. company to elect, for one taxable year, an 85% dividends-received deduction with respect to qualifying cash dividends from its foreign subsidiaries, when such dividends were in excess of a base period amount and were reinvested in the U.S. pursuant to a ‘domestic reinvestment plan’.

Of course, Congressmen and women cannot be expected to understand that money is fungible and that there is no way to prove that a ‘domestic reinvestment plan’ was anything more than normal corporate investment that would have occurred without a tax incentive.

However, the Federal Reserve national flow of funds accounts (Table 102) indicate that in 2005 there was indeed a massive repatriation of U.S. corporate earnings held overseas, as this graph shows:

	US Profits Retained Abroad

Foreign profits retained abroad appear as red bars, while domestic profits are in blue.

In 2005, the red bars for foreign profits held abroad suddenly disappear, while domestic profits zoom upwards.

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