NEW YORK — Goldman Sachs expects to take a $5 billion hit to profits for the fourth quarter and year because of the tax overhaul signed into law last week.
The New York bank said Friday that two thirds of the $5 billion are due to changes in repatriation taxes, when funds are returned from overseas. The remainder includes the "effects of the implementation of the territorial tax system and the remeasurement of U.S. deferred tax assets at lower enacted corporate tax rates."
U.S. companies had found ways to legally park money overseas to avoid the higher U.S. corporate tax. It has been expected that changes in the law would prompt some of those companies to return money to the U.S., potentially $2.5 trillion or more.
Economists believe the overall effect on the economy will be muted because of cuts to the U.S. corporate tax rate.
Historically, repatriated profits have not had a broad effect on the U.S. economy.
A 2004 law temporarily cut taxes on repatriated profits to 5.25
The tax change for Goldman Sachs was revealed in a filing with the U.S. Securities and Exchange Commission early on Friday.
The company did not say how changes in the tax law would affect its decisions on investments going forward.
The Associated Press