Apple could be one of the 'biggest beneficiaries' of Trump's tax plan

Trump and Congressional Republicans have set their sights on tax reform. They hope to simplify the tax code to benefit corporate America and the middle class, but the details have yet to be decided.

What looks to be clear though, is that Apple would benefit greatly if the proposed plans end up becoming a law. RBC analyst Amit Daryanani said that in his mind, Apple is "one of the biggest beneficiaries" of the proposed plan.

"While details are far from finalized, we think that potential provisions could add $4.00-$4.50 to our FY18 EPS estimate under a relatively conservative set of assumptions,' Daryanani said in a recent note to clients. That would boost fiscal year 2018 earnings to $14.69 per share. 

A few main areas of the proposed tax plan could greatly benefit Apple, according to Daryanani. They are as follows:

  1. "Deduction of capital investments"
  2. "Reduction in Federal corporate tax rate, which should bring effective tax rate to below 20%"
  3. "Repatriation of offshore cash at a low tax rate"

Deducting capital expenses is a bit complicated, but would essentially allow Apple to take the money it invests in itself (its massive multi-billion dollar campus excluded because it is a "structure") and expense it. Details of exactly how much Apple could deduct are unclear, but Daryanani estimates it to be about $8 billion for 2018.

RELATED: Take an inside look at Apple's annual WWDC: 

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Apple Senior Vice President of Retail, Angela Ahrendts, speaks during a product launch event in Cupertino, California, U.S. September 12, 2017. REUTERS/Stephen Lam
People enter the Steve Jobs Theater before the start of a product launch event at Apple's new campus in Cupertino, California, U.S. September 12, 2017. REUTERS/Stephen Lam
Tim Cook, CEO of Apple, speaks as a tribute video to the late Apple co-founder Steve Jobs plays behind him during a product launch event in Cupertino, California, U.S. September 12, 2017. REUTERS/Stephen Lam
Tim Cook, CEO of Apple, speaks during a product launch event in Cupertino, California, U.S. September 12, 2017. REUTERS/Stephen Lam
Members of the media enter the Steve Jobs Theater at Apple's new headquarters ahead of a media event where Apple is expected to announce a new iPhone and other products in Cupertino, California, on September 12, 2017. / AFP PHOTO / Josh Edelson (Photo credit should read JOSH EDELSON/AFP/Getty Images)
CUPERTINO, CA - SEPTEMBER 12: A view of the Steve Jobs Theatre at Apple Park on September 12, 2017 in Cupertino, California. Apple is holding their first special event at the new Apple Park campus where they are expected to unveil a new iPhone. (Photo by Justin Sullivan/Getty Images)
A crowd of people wait to enter the Steve Jobs Theater ahead of a media event where Apple is expected to announce a new iPhone and other products in Cupertino, California on September 12, 2017. / AFP PHOTO / Josh Edelson (Photo credit should read JOSH EDELSON/AFP/Getty Images)
CUPERTINO, CA - SEPTEMBER 12: Attendees enter the Steve Jobs Theatre for a special event at Apple Park on September 12, 2017 in Cupertino, California. Apple is holding their first special event at the new Apple Park campus where they are expected to unveil a new iPhone. (Photo by Justin Sullivan/Getty Images)
Tim Cook, chief executive officer of Apple Inc., speaks about Apple TV 4K during an event at the Steve Jobs Theater in Cupertino, California, U.S., on Tuesday, Sept. 12, 2017. Apple Inc.�unveiled a new Watch on Tuesday that can make calls and access the internet without an iPhone nearby, freeing the device from a limitation that had given some potential buyers pause. Photographer: David Paul Morris/Bloomberg via Getty Images
Tim Cook, CEO of Apple, speaks as images are shown behind him during a product launch event in Cupertino, California, U.S. September 12, 2017. REUTERS/Stephen Lam
Jeff Williams, Apple COO, speaks as product images are shown behind him during a launch event in Cupertino, California, U.S. September 12, 2017. REUTERS/Stephen Lam
Tim Cook, chief executive officer of Apple Inc., speaks about Apple Watch during an event at the Steve Jobs Theater in Cupertino, California, U.S., on Tuesday, Sept. 12, 2017. Apple plans to unveil three phonesanother firstincluding a premium model that could cast a halo over the rest of the line, and perhaps even the rest of the smartphone industry. Photographer: David Paul Morris/Bloomberg via Getty Images
Tim Cook, CEO of Apple, introduces the iPhone 8 during a launch event in Cupertino, California, U.S. September 12, 2017. REUTERS/Stephen Lam
CUPERTINO, CA - SEPTEMBER 12: Apple CEO Tim Cook speaks during an Apple special event at the Steve Jobs Theatre on the Apple Park campus on September 12, 2017 in Cupertino, California. Apple is holding their first special event at the new Apple Park campus where they are expected to unveil a new iPhone. (Photo by Justin Sullivan/Getty Images)
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A reduction in the corporate tax rate is pretty self-explanatory. Paying fewer taxes is good for anyone's bottom line.

Finally, Daryanani expects Apple to earn $70.37 billion before taxes in 2018. After deducting $8 billion of capital expenses, and paying a reduced tax rate of 20%, Apple could save as much as $5.34 billion and add as much as $1.08 per share to its earnings, compared to its current tax code.

Apple holds about $219 billion of cash overseas that it could move back to the US according to Daryanani. The GOP's tax plan does not specify a specific tax rate for repatriated earnings, but Daryanani expects it to be close to 10%. If Apple uses that repatriated money to purchase stocks, it could add an additional $3.25 per share to current earnings expectations.

Combining the savings from deductions and a lower tax rate ($1.08 per share) with the earnings boost from repatriated cash ($3.25 per share) could add about $4.33 to Apple's 2018 fiscal year, according to Daryanani.

He believes if tax reform passes in Apple's favor, it could send the company across the fabled $1 trillion market cap number, a first for a US company. Apple's market cap currently sits at about a $801 billion.

The tax-based boost could be nullified by adverse decisions by the European Commission, however. The commission recently ruled that Ireland would have to accept about $15 billion in back taxes from Apple after an arrangement between the two entities was ruled illegal.

Apple shares are up 34.08% this year.  

Read more about the European Commission's ruling against Apple here...

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SEE ALSO: EU orders Apple to pay up to €13 billion in taxes

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