On March 2, 2017, agents representing the U.S. attorney’s office for the Central District of Illinois, the Internal Revenue Service, and two other agencies raided three Peoria, Illinois buildings owned by construction equipment manufacturing company Caterpillar Inc., in relation to Caterpillar’s offshore tax practices. These tax practices involve the use of a subsidiary corporation based in Switzerland, known as CSARL.<\/p>\n
In a statement, Caterpillar spokeswoman Corrie Heck Scott confirmed that “law enforcement is present in various Peoria-area Caterpillar facilities executing a search warrant.” She also stated that, “Caterpillar is cooperating” with law enforcement.<\/p>\n
Caterpillar CEO Jim Umpleby also released a statement in which he confirmed the raids and apologized to his employees.\u00a0“This morning, a number of our colleagues in the Peoria area were surprised when federal authorities arrived to execute a search warrant,” the statement read. “I’m sorry that we had to experience this today,”<\/p>\n
The tax strategy, designed by the accounting firm then known as PriceWatterhouseCoopers, involved the transfer of the rights to Caterpillar’s profits to CSARL, a wholly-owned subsidiary. Rather than paying the 29 percent effective tax rate it would owe on the profits had they remained in the United States, Caterpillar only paid a rate of 4 to 6 percent that it had negotiated directly with the Swiss government.<\/p>\n
These tax practices were the subject of a formal Congressional inquiry in 2014, in which it was concluded that the scheme, in which Caterpillar had transferred over $8 billion in profits to CSARL, allowed Caterpillar to slash its U.S. tax bill by $2.4 billion over the course of 13 years; however, the inquiry did not conclude that Caterpillar’s practices had been illegal. \u00a0In 2015, Caterpillar was served with a grand jury subpoena for documents related to the movement of cash between its U.S. business and its Swiss subsidiary.<\/p>\n
Caterpillar, whose stock prices fell 4.3 percent on the day of the raid, has been the subject of recent praise from President Trump. While Trump railed against corporate expatriation of profits throughout his campaign, it remains to be seen how his administration intends to deal with the issue.<\/p>\n","protected":false},"excerpt":{"rendered":"
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