Daily Archives: February 9, 2017

Democrats on the House Ways and Means Committee are urging their colleagues to oppose a resolution that would repeal Obama administration rules aimed at curbing offshore tax deals.

"These regulations are intended to combat aggressive corporate tax planning techniques that, rather than serving an economic purpose, are used by some corporations to avoid taxes," the Democratic tax-writers wrote in a letter Wednesday to their colleagues.

The letter comes after Rep. Todd Rokita (R-Ind.) introduced a resolution last week to use the Congressional Review Act to disapprove of the rules, which the Treasury Department finalized in October. A vote on Rokita's resolution has not yet been announced, but in recent weeks, the House has approved several resolutions to undo recent Obama-era regulations.

When Treasury initially proposed the rules in the spring, both Republican and Democratic lawmakers had concerns that they would hurt business transactions that had nothing to do with inversions. But the Democratic lawmakers said that "Treasury made extensive revisions to its original draft in order to address these concerns."

If the rules are repealed, "Republicans in Congress will open the door to more companies renouncing their U.S. citizenship for tax purposes, while still reaping the benefits of doing business in America a tax practice President Trump railed against on the campaign trail," the Democrats said.

Rokita said in a statement Wednesday that his resolution "will reduce the tax burden on Indiana firms and all American companies so they can grow our economy and create jobs."

The National Association of Manufacturers supports Rokita's resolution. The group said that Treasury's rules, even with revisions, would impose documentation, compliance and cost burdens on many manufacturers.

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Dems: Don't repeal offshore tax rules | TheHill - The Hill

President Donald Trumps plan to use corporate profits returned from overseas to help finance nationwide improvements to roads, bridges, airports and other public works picked up an important supporter in the U.S. House: Representative Bill Shuster.

The dollars are out there, so we get a piece of that, Shuster, a Pennsylvania Republican who chairs the House Transportation and Infrastructure Committee, said in an interview. The process of returning corporate profit to the U.S., known as repatriation, can be one of the sources that helps generate funding for repairs and new construction, he said.

Photographer: Andrew Harrer/Bloomberg

Trump has proposed spending $1 trillion during the next decade on U.S. infrastructure and wants to leverage more private-sector dollars. Gary Cohn, Trumps chief economic adviser, said on Fox Business on Feb. 3 that the president wants to use proceeds from repatriation to help fund the improvements.

U.S. companies have an estimated $2.6 trillion in profits that theyve earned overseas and are keeping there. Under federal tax law, offshore earnings arent taxable in the U.S. until companies decide to return the income to America. Trump and House Republicans have called for establishing a lower tax rate on those profits, easing their return to the U.S.

But theres been less agreement about how to use the resulting tax revenue. Shuster said he expects a lot of it would be used to offset broader tax-rate cuts, as House Republican leaders have proposed. What exactly is the funding, thats what were going to try to figure out and debate and move, Shuster said. Everythings going to be on the table.

Democrats have said theyre willing to work with Trump on infrastructure, including in the Senate, where lawmakers have proposed spending $1 trillion during the next 10 years. Republican congressional leaders, however, are pushing for private investment to play a bigger role. Republican House Speaker Paul Ryan has said he would like to see $40 in private spending for every additional federal dollar.

Asked whether Ryan supports using repatriation for infrastructure, spokeswoman AshLee Strong said only that congressional leaders will work with the Trump administration to craft a fiscally responsible infrastructure plan.

Witnesses at the first hearing of the House Transportation and Infrastructure Committee last week, including FedEx Corp. Chairman and Chief Executive Officer Frederick Smith, said they dont think additional private-sector funding will be enough to meet the nationwide need. They said additional federal spending, from a gas tax that hasnt been increased since 1993 or other sources, must be included.

Shuster said a combination of additional federal spending and increased private investment will be needed but said he couldnt provide the precise mix. Asked whether hed support increasing the gas tax, Shuster didnt rule it out as part of negotiations to get a final package.

That is certainly a difficult thing to do, he said. Its something we should look at and consider.

One thing he cant support: creating a federal infrastructure bank to provide funding for projects, Shuster said. Senate Democrats and Steve Mnuchin, Trumps choice to be Treasury secretary, have floated that concept, but Shuster said he feared it would become a boondoggle in Washington.

Its also important that whatever infrastructure package emerges be done in cooperation with U.S. states, Shuster said.

You have to have the states buy-in to this infrastructure bill and what they want to do, he said.

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Its also likely that infrastructure could help get Democrats to accept changes they may not want on taxes and health care, Shuster said.

As we go through Obamacare and tax reform, for the Democrats, theres some bitter pills that they may have to swallow, Shuster said. And the sweet chaser is infrastructure dollars.

Originally posted here:

Trump's Plan to Tap Offshore Profit for Infrastructure Gains an Ally ... - Bloomberg

You have to give Diamond Offshore (NYSE:DO) credit. Despite an absolutely brutal market for offshore rigs, the company was able to not only soundly beat estimates for the quarter, but it was able to actually increase earnings. That's something that almost no other rig owner has been able to say for the past several years.

Here's a look at how Diamond was able to pull off this rather remarkable feat, and how management thinks the position it is in today will help to make it an even more competitive company in the coming years.

Image source: Getty Images.

*in millions, except per-share data. Source: Diamond Offshore earnings release.

Based on the dynamics of the oil and gas industry today, the last group of companies you might expect to see an uptick in earnings is with offshore rig companies. Yet that is exactly what happened with Diamond this past quarter. That net income gain is a little larger because of an early termination fee that added $0.28 per share to the bottom line, but even after we pull out that gain it was still an impressive gain over the two comparable quarters.

There are some gains that are sustainable, and some that aren't. One of the most notable gains was in its Mid-water floater segment. However, this is the segmenet where it netted that one time contract termination gain. The one that is truly impressive, though, is the gains for its ultra deepwater fleet. Two rigs -- the Ocean GreatWhite and Ocean BlackLion -- both started 3 year contract terms.

The Ocean GreatWhite is in a unique position because the job it was hired to do was drill in Austrailia's Bight Basin for BP (NYSE:BP). BP has since suspended operations there, however, so the two have worked out a hybrid standby contract that will remain in place until BP can find a place to put this ship to work.

Source: Diamond Offshore earnings release. Author's chart.

The increase in revenues and the declines in operating costs have also freed up cash flow for the company, which is enabling it to pay down some debt. This past quarter alone Diamond was able to pay back $188 million in short term borrowings. With little in terms of capital spending in the coming quarters, the company should be able to throw off quite a bit of cash for either paying down debt or even returning that cash to shareholders. Considering the depressed share price, it wouldn't be shocking to see Diamond buy back some stock.

For the most part, CEO Marc Edwards' comments were on all of the action items that have happened as of late, notably the contracting of several rigs. While that does give the company a decent boost to the income statement now, Edwards also explained how there are some other advantages to being in this position for the future.

Although the next few years will be challenging for offshore drillers, we have uniquely positioned Diamond Offshore to take best advantage of a recovery either in '19 or 2020.

For example, our sixth-generation fleet is contracted through 2019. Our clients have a strong preference for rigs that have recently completed other work. In other words, rigs that are hot. They do not want to take the financial or time risk of qualifying a rig which has been stacked for a lengthy period. We are already seeing some tenders illustrate a strong preference for rigs that are hot. As the market recovers, our rigs will be finishing up their contracts and will therefore be the most attractive to our clients.

Diamond Offshore has done a great job of transforming itself over the past several years. It has gone from a company with an old fleet of rigs with little to differentiate itself from the pack to a young, capable fleet that is working on some innovative ideas like its partnership with General Electric for its pay for performance blow out preventors and its new generation design for ultra deepwater rigs.

With a decent chunk of its fleet contracted out over the next several years, it looks as though Diamond will be in a much better position than its peers to handle the ups and downs of the market. With shares trading at very cheap prices today, it may be a long term investment worth putting on your radar.

Tyler Crowe and The Motley Fool own shares of General Electric. The Motley Fool has a disclosure policy.

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Diamond Offshore Surprises Everyone With a Fourth Quarter ... - Motley Fool