Finance_With the intent of stimulating domestic investment and employment, the American Jobs Creation Act of 2004 included a provision under section 965 that allowed for a one-time tax deduction on repatriated dividends. In accordance with the law, qualifying repatriated funds were to be allocated to specific types of investment-related expenditures. However, since money is fungible, there is a question as to whether the law increased domestic investment spending or simply freed up cash that was to be allocated to investment, allowing corporations to increase other types of expenditures instead which were unrelated to capital investment and labor demand. Drawing from the 10-k filings of about 60 repatriating corporations, this paper analyzes the effect of the tax deduction on five types of corporate expenses, only three of which were permitted uses of qualifying funds. I find that the temporary tax deduction coincided with an increase in share repurchases and dividend payments to shareholders, both expressly unpermitted uses of qualifying repatriations. I find no evidence of a boost to the approved expenses of research and development, capital investment, or long term debt repayments. This suggests that the Act was ineffective at stimulating domestic investment, merely freeing up cash for other uses
