With a final tax reform bill moving closer to passage by Congress, analysts said the legislation has a mixed appeal for large U.S. technology companies, some of which already pay effective tax rates below the proposed 20% federal rate due to significant overseas cash holdings.

Both the House and Senate versions of the Tax Cuts and Jobs Act would lower the corporate tax rate to 20% from 35%, though the House would implement the new rate a year sooner, in 2018. According to S&P Capital IQ data, Apple Inc. holds roughly $246 billion, or almost 94%, of its cash and cash equivalents overseas. For 2016, the company paid an effective tax rate of 25.6%. Microsoft Corp. holds $127.9 billion, or 96%, of its cash and cash equivalents overseas, and the company paid a 2016 effective tax rate of 19.9%. Google Inc.-parent Alphabet Inc. holds $57.9 billion, or 61%, of its cash and cash equivalents overseas, and paid an effective tax rate of 19.3%.

In a recent research report, Goldman Sachs recently estimated the median S&P 500 company pays an effective tax rate of 27%, as compared to a 39% statutory rate — a figure that includes both the current 35% federal rate and an additional 4% for state and local taxes. By comparison, Goldman Sachs analysts said, "Tech has the lowest effective tax rate of any sector (24%) and would benefit least under the various proposals."

Looking at other companies in other industries of the technology, media and telecom sector, telcos AT&T Inc. and Verizon Communications Inc. paid effective tax rates of 32.7% and 35.2%, respectively, in 2016. Media giants Walt Disney Co. and Time Warner Inc. paid effective tax rates of 34.2% and 24.7% for the year. Goldman Sachs estimated tax reform will result in an effective tax rate slightly below 24% for the S&P 500, including federal, state and local taxes. This is notably higher than the effective tax rates paid by Microsoft and Alphabet in 2016.

Fitch argued tax reform would benefit tech companies in the long run because they would begin to repatriate the billions of dollars in cash held overseas. House and Senate tax reform proposals suggest a respective one-time tax of 14% or 14.5% for repatriating cash and a rate of 7% or 7.5% for illiquid cash-like instruments.

The ratings agency expects technology companies to use repatriated off-shore cash largely for shareholder returns rather than paying down debt or funding acquisitions. "Ready access to capital markets for most technology issuers has already enabled strategic acquisitions," the firm said. It expects tax reform to be a credit positive for the U.S. technology sector overall.

Speaking at a recent investor conference, Microsoft Executive Vice President and CFO Amy Hood said tax reform will not change the company's M&A strategy. "I don't want to wait for a tax reform to buy smart assets," she said.

A number of other aspects of the tax reform legislation also stand to impact the tech sector. Both the House and Senate bills preserve the deduction for research and development, or R&D, something for which the tech sector and others have lobbied. However, the Senate bill retained a 20% corporate alternative minimum tax, which aims to prevent businesses from taking so many credits and deductions that they pay no tax. With the federal statutory rate set at 20% as well, more companies would likely use the AMT, and any company that uses it cannot take the research and development credit.

Caroline Harris, chief tax counsel and vice president of tax policy at the U.S. Chamber of Commerce, argued in a blog post, "Retaining the AMT in reform … eviscerates the impact of certain pro-growth policies like the R&D tax credit."

All in all, the technology industry trade group the Information Technology Industry Council has said it supports the current proposed reforms, with council CEO Dean Garfield saying he looks forward to "working with the House and the Senate to address outstanding issues and ensure we send a robust, pro-growth tax bill to the president's desk."