Bringing It Home: A Study of the Incentives Surrounding the Repatriation of Foreign Earnings Under the American Jobs Creation Act of 2004

The American Jobs Creation Act of 2004 (the Act) creates a temporary tax holiday that effectively reduces the U.S. tax rate on repatriations from foreign subsidiaries from 35% to 5.25%. Firms receive the reduced tax rate by electing to take an 85% dividends received deduction on repatriations in 2004 or 2005. This paper investigates the characteristics of firms that repatriate under the Act and how they use the repatriated funds. We find that firms that repatriate under the Act have lower investment opportunities and higher free cash flows than nonrepatriating firms. Further, we find that repatriating firms increase share repurchases during 2005 by approximately $60 billion more than nonrepatriating firms, an amount that cannot be explained by differences in earnings between the two groups of firms. This increase represents about 20$291.6 billion repatriated by our sample firms under the Act

Rhombomere of origin determines autonomous versus environmentally regulated expression of Hoxa3 in the avian embryo

We have investigated the pattern and regulation of Hoxa3 expression in the hindbrain and associated neural crest cells in the chick embryo, using whole mount in situ hybridization in conjunction with DiI labeling of neural crest cells and microsurgical manipulations. Hoxa3 is expressed in the neural plate and later in the neural tube with a rostral border of expression corresponding to the boundary between rhombomeres (r) 4 and 5. Initial expression is diffuse and becomes sharp after boundary formation. Hoxa3 exhibits uniform expression within r5 after formation of rhombomeric borders. Cell marking experiments reveal that neural crest cells migrating caudally, but not rostrally, from r5 and caudally from r6 express Hoxa3 in normal embryo. Results from transposition experiments demonstrate that expression of Hoxa3 in r5 neural crest cells is not strictly cell-autonomous. When r5 is transposed with r4 by rostrocaudal rotation of the rhomobomeres, Hoxa3 is expressed in cells migrating lateral to transposed r5 and for a short time, in condensing ganglia, but not by neural crest within the second branchial arch. Since DiI-labeled cells from transposed r5 are present in the second arch, Hoxa3-expressing neural crest cells from r5 appear to down-regulate their Hoxa3 expression in their new environment. In contrast, when r6 is transposed to the position of r4 after boundary formation, Hoxa3 is maintained in both migrating neural crest cells and those positioned within the second branchial arch and associated ganglia. These results suggest that Hoxa3 expression is cell-autonomous in r6 and its associated neural crest. Our results suggest that neural crest cells expressing the same Hox gene are not eqivalent; they respond differently to environmental signals and exhibit distinct degrees of cell autonomy depending upon their rhombomere of origin

Eph-Dependent Tyrosine Phosphorylation of Ephexin1 Modulates Growth Cone Collapse

SummaryEphs regulate growth cone repulsion, a process controlled by the actin cytoskeleton. The guanine nucleotide exchange factor (GEF) ephexin1 interacts with EphA4 and has been suggested to mediate the effect of EphA on the activity of Rho GTPases, key regulators of the cytoskeleton and axon guidance. Using cultured ephexin1−/− mouse neurons and RNA interference in the chick, we report that ephexin1 is required for normal axon outgrowth and ephrin-dependent axon repulsion. Ephexin1 becomes tyrosine phosphorylated in response to EphA signaling in neurons, and this phosphorylation event is required for growth cone collapse. Tyrosine phosphorylation of ephexin1 enhances ephexin1’s GEF activity toward RhoA while not altering its activity toward Rac1 or Cdc42, thus changing the balance of GTPase activities. These findings reveal that ephexin1 plays a role in axon guidance and is regulated by a switch mechanism that is specifically tailored to control Eph-mediated growth cone collapse

Modelling human choices: MADeM and decision‑making

Research supported by FAPESP 2015/50122-0 and DFG-GRTK 1740/2. RP and AR are also part of the Research, Innovation and Dissemination Center for Neuromathematics FAPESP grant (2013/07699-0). RP is supported by a FAPESP scholarship (2013/25667-8). ACR is partially supported by a CNPq fellowship (grant 306251/2014-0)

An analysis of the relationship between the permanently reinvested earnings, repatriation taxes, and earnings management incentives of United States multinationals

This paper investigates factors that influence the amount of foreign retained earnings permanently reinvested abroad and the market valuation of these earnings. I examine the effects of repatriation taxes and the difference between foreign and domestic profitability on the amount of foreign subsidiary earnings that firms reinvest abroad using the permanently reinvested earnings designation as a proxy for foreign retained earnings. This extends prior work that examines the effect of repatriation taxes on repatriations by including both foreign and domestic profitability and by allowing the effects to vary by the firm's foreign tax credit position. The results are consistent with the hypotheses and indicate that foreign retained earnings increase with the difference between foreign and domestic after-tax-returns. Foreign retained earnings decrease with the foreign tax rate for firms in binding foreign tax credit positions, but are not related to the foreign tax rate for firms in nonbinding foreign tax credit positions. Next, I examine how earnings management incentives affect the amount of foreign subsidiary earnings designated as permanently reinvested, controlling for the effects of profitability and repatriation taxes. I examine whether firms that are close to debt covenant violation or that fail to meet their target earnings have higher permanently reinvested earnings. The permanently reinvested earnings designation provides the opportunity to manage earnings because U.S. repatriation taxes need not be recognized in financial statement income if the earnings are designated as permanently reinvested. I find no evidence of earnings management to meet debt covenants; however, I do find evidence of earnings management to meet target earnings. Finally, I examine the market valuation of taxes on permanently reinvested earnings and whether this valuation differs for earnings managers and non-earnings managers. I hypothesize that because the tax estimate is undiscounted, the market values taxes on permanently reinvested earnings more negatively for earnings managers than for non-earnings managers because it perceives the investment to be of a shorter duration. The results support this hypothesis and suggest that the market recognizes earnings management attempts and values the tax estimate as if the reinvestment of foreign subsidiary earnings by earnings managers is not permanent

Dividend Taxes and Implied Cost of Equity Capital

We estimate firm-level implied cost of equity capital based on recent advances in accounting and finance research and examine the effect of dividend taxes on the cost of equity capital. We investigate whether dividend taxes affect firms' cost of capital by testing the relation between the implied cost of equity capital and a measure of the tax-penalized portion of dividend yield, which we define as the product of dividend yield and the dividend tax penalty. The results generally support the dividend tax capitalization hypothesis. We find a positive relation between the implied cost of equity capital and the tax-penalized portion of dividend yield that is decreasing in aggregate institutional ownership, our proxy for tax-advantaged investors. The evidence in this study adds to the understanding of the effect of investor-level taxes on equity value. Copyright 2005 The Institute of Professional Accounting, University of Chicago.