Wall Street Journal:  Firms Keep Stockpiles of 'Foreign' Cash in U.S.:

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.

Some companies, including Internet giant Google, software maker Microsoft and data-storage specialist EMC keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, according to people familiar with the companies' cash positions.

In the eyes of the law, the IRS 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. And as long as it sits in U.S. bank accounts or in U.S. Treasurys, it is safer than if it were plowed into potentially risky foreign investments.

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." "If it is a U.S.-dollar asset, that means ultimately it is in the U.S. economy in some fashion," he adds. "Where it is not is in the hands of the firm's shareholders."

Update:  The Tax Analysts Blog:  Missing Half the Cash, by David Cay Johnston