U.S. corporations hold significant amounts of cash, and this has been explained in the literature by transaction costs and precautionary motives. This paper provides a tax-based explanation, suggesting that U.S. multinational firms hold cash in foreign subsidiaries due to the tax costs associated with repatriating foreign income. The study finds that firms facing higher repatriation tax burdens hold more cash, hold this cash abroad, and hold it in affiliates that trigger high tax costs when repatriating earnings. Estimates indicate that a one standard deviation increase in the tax burden from repatriating foreign income is associated with a 7.9% increase in the ratio of cash to net assets. Certain firms, specifically those that are less financially constrained domestically and more technology intensive, exhibit a higher sensitivity of affiliate cash holdings to repatriation tax burdens. The paper analyzes the impact of repatriation tax burdens on cash holdings using data from Compustat and the Bureau of Economic Analysis (BEA). It finds that firms with higher repatriation tax burdens hold more cash abroad, and that these tax burdens increase foreign cash holdings but are not significant in explaining domestic cash holdings. Affiliates that trigger high tax costs when repatriating earnings hold higher levels of cash than other affiliates of the same firm. Technology intensive firms appear to have affiliate cash holdings that are particularly sensitive to the tax costs triggered by repatriations. The paper also finds that firms with high levels of domestic leverage and below investment grade (or no) debt ratings are less likely to defer taxes associated with repatriations by holding cash abroad. Their affiliate cash holdings are low and are not related to host country tax rates in a statistically significant way. The results are robust across a variety of measures for the repatriation tax burden and specifications that analyze levels of cash holdings as well as changes in cash holdings. The findings suggest that the tax costs of repatriating foreign earnings significantly increase consolidated cash holdings, and that these effects are consistent across different measures of the tax burden of repatriations. The paper concludes that the tax-based explanation for the high levels of cash held by U.S. corporations is supported by the empirical evidence.U.S. corporations hold significant amounts of cash, and this has been explained in the literature by transaction costs and precautionary motives. This paper provides a tax-based explanation, suggesting that U.S. multinational firms hold cash in foreign subsidiaries due to the tax costs associated with repatriating foreign income. The study finds that firms facing higher repatriation tax burdens hold more cash, hold this cash abroad, and hold it in affiliates that trigger high tax costs when repatriating earnings. Estimates indicate that a one standard deviation increase in the tax burden from repatriating foreign income is associated with a 7.9% increase in the ratio of cash to net assets. Certain firms, specifically those that are less financially constrained domestically and more technology intensive, exhibit a higher sensitivity of affiliate cash holdings to repatriation tax burdens. The paper analyzes the impact of repatriation tax burdens on cash holdings using data from Compustat and the Bureau of Economic Analysis (BEA). It finds that firms with higher repatriation tax burdens hold more cash abroad, and that these tax burdens increase foreign cash holdings but are not significant in explaining domestic cash holdings. Affiliates that trigger high tax costs when repatriating earnings hold higher levels of cash than other affiliates of the same firm. Technology intensive firms appear to have affiliate cash holdings that are particularly sensitive to the tax costs triggered by repatriations. The paper also finds that firms with high levels of domestic leverage and below investment grade (or no) debt ratings are less likely to defer taxes associated with repatriations by holding cash abroad. Their affiliate cash holdings are low and are not related to host country tax rates in a statistically significant way. The results are robust across a variety of measures for the repatriation tax burden and specifications that analyze levels of cash holdings as well as changes in cash holdings. The findings suggest that the tax costs of repatriating foreign earnings significantly increase consolidated cash holdings, and that these effects are consistent across different measures of the tax burden of repatriations. The paper concludes that the tax-based explanation for the high levels of cash held by U.S. corporations is supported by the empirical evidence.