Utilizing the Homeland Investment Act in 2005

One of the more remarkable provisions in the American Jobs Creation Act is Section 422, Incentives to Reinvest Foreign Earnings in the United States, often referred to as the Homeland Reinvestment Act. The provision was drafted to encourage the repatriation of profits generated overseas and spur investment and job growth in the US. It is a temporary provision that allows the repatriation of certain foreign earnings to the US at a substantially reduced US tax rate. The downside for concluding incorrectly that a dividend is eligible for HIA is very substantial - up to a 35% tax on a dividend that in most cases would not have otherwise been paid. Companies should have already begun modeling their expected benefits, securing necessary financing and implementing strategies to realize HIA benefits efficiently, given the short time window. The legislative history clearly states that there will be no repeat performance.