Rumpelstiltskin's trick: more on those offshore corporate cash piles

We've written plenty about multinational corporations sitting on huge untapped offshore cash piles. Now, from the Wall Street Journal:

"There's a funny thing about the estimated $1.7 trillion that American companies say they have indefinitely invested overseas: A lot of it is actually sitting right here at home. . . . held in U.S. dollars or parked in U.S. government and corporate securities. . . .  Sizable U.S.-dollar accounts are often owned by U.S. companies' foreign subsidiaries in tax havens like Ireland, the Cayman Islands and Singapore. But the accounts ultimately are U.S. accounts, regardless of where they are opened; a foreign bank typically will hold dollar deposits in a so-called correspondent bank in the U.S.

In the eyes of the law, the Internal Revenue Service and company executives, however, this money is overseas. As long as it doesn't flow back to the U.S. parent company, the U.S. doesn't tax it.

In accounting terms, the location of the funds may be just a technicality. But for people on both sides of the contentious debate over corporate-tax reform, the situation highlights what they see as the absurdity of rules that encourage companies to engage in semantic games, legal gymnastics and inefficient corporate-financing methods to shield profits from U.S. taxes.

The fact that much of the money already is in the U.S. also undermines a central argument made by companies seeking tax relief to bring home money they have earned abroad, tax experts and lawmakers say: That the cash is languishing overseas when it could be invested to the benefit of the U.S. economy.

Edward Kleinbard, a professor at the University of Southern California's Gould School of Law and a former chief of staff for Congress's Joint Committee on Taxation, said there is a misperception that companies' excess cash is inaccessible, "somehow held in gold coins and guarded by Rumpelstiltskin."

Just another thing to bear in mind in this long-running debate.