By James R. Hagerty
A U.S. Senate panel scheduled a hearing for April 1 on
Caterpillar Inc.'s offshore tax strategy.
The hearing of the Senate's Permanent Subcommittee on
Investigations, starting at 9:30 a.m. EDT in the Dirksen Senate
Office Building, is the latest in a series of efforts by the panel
to examine how U.S.-based companies allocate income among their
foreign subsidiaries and how those decisions are influenced by
federal tax rules. The committee previously has examined tax
practices of Apple Inc., Microsoft Corp. and Hewlett-Packard
Co.
Caterpillar, the world's largest maker of construction and
mining equipment, released a statement saying it has agreed to
testify before the subcommittee. The Peoria, Ill.-based company
said the inquiry is "focusing on how our international business
operations may impact the U.S. taxes paid by Caterpillar."
Caterpillar said its effective tax rate averages about 29%. That
is "relatively high for a company with substantial earnings
generated from business activities outside the U.S.," the company
said.
Plans for the hearing were first reported by the Bloomberg news
service.
In a Feb. 18 securities filing, Caterpillar said the Internal
Revenue Service was examining its tax returns for 2007 to 2009 and
had sought adjustments related to overseas operations and foreign
tax credits. "We disagree with these proposed adjustments,"
Caterpillar said, adding that it would "vigorously contest" any
decision by the IRS to impose them. Caterpillar said it believed
this tax examination wouldn't have "a material adverse effect on
our consolidated financial position.
Daniel J. Schlicksup, who had worked as a Caterpillar tax
manager, filed a lawsuit in U.S. district court in Peoria in June
2009 alleging that the company shifted profits to offshore
companies to avoid more than $2 billion of U.S. federal income tax
in what the suit described as a "tax dodge." Caterpillar denied it
had violated tax rules. Caterpillar and Mr. Schlicksup reached a
confidential settlement of the case in February 2012.
Write to James R. Hagerty at bob.hagerty@wsj.com