WASHINGTON (Bloomberg) — A Senate committee is investigating whether multinational companies abused a tax break in 2004 that gave them an 85 percent discount on profits made overseas and brought back to the US.

The Senate Permanent Subcommittee on Investigations is circulating a 17-question survey asking companies to explain whether they used the cash to create US jobs as promised or whether they bought back stock or increased executive pay in violation of Treasury Department rules.

"Proponents claim that repatriation tax holidays encourage businesses to bring foreign earnings back into the United States," said Michigan Senator Carl Levin, a Democrat who is chairman of the subcommittee. "But it may do the exact opposite by encouraging companies to move operations offshore or shift profits to tax havens in anticipation of a future tax holiday and by alleviating any worry that the funds might get stuck offshore."

The probe comes as many companies, including Oracle Corp., Dell Inc., Hewlett-Packard Co. and Eli Lilly & Co., as well as the US Chamber of Commerce, are urging lawmakers to include an identical tax break in a Senate fiscal stimulus bill being debated this week. The tax break was offered for the first time in 2004.

Tax law generally allows companies to defer bringing foreign profits into the US as long as they desire, creating an incentive for companies that base operations in low-tax countries such as Ireland or Singapore to accumulate profits there.

The top US corporate tax rate is 35 percent. The 2004 repatriation tax holiday allowed companies that stockpiled trillions of dollars overseas, never taxed by the US, to bring the money into this country at an effective rate of 5.25 percent.

Critics say rules requiring the companies to create jobs with the imported cash are unenforceable.

"Money is fungible," Robert McIntyre, director of Citizens for Tax Justice, a Washington-based research group that is often critical of corporate tax practices, said in 2004. "You take it from one pot, you put it in another. Congress says you can't use repatriated profits for a prohibited purpose, but of course you can free up some other money and use that for the prohibited purpose."

Levin and North Dakota Senator Byron Dorgan, another Democrat, said that's what happened after the 2004 tax break. Citing a study issued last month by the Congressional Research Service, the senator said Pfizer Inc. repatriated $37 billion, more than any other company, yet closed plants and cut 9,000 jobs in 2005.

"There's another phrase for repatriation — it's called rewarding the outsourcing of jobs," Dorgan said. "If we allow US corporations to once again send the money they earn back to the US at a discounted tax rate, it will only lead to more companies moving their profits offshore."

Nevada Senator John Ensign, a Republican, will offer an amendment to allow a new one-year holiday, spokesman Tory Mazzola said.

"This is a plan that will provide real stimulus now because billions of dollars will be invested in the United States and at the same time create hundreds of thousands of jobs," Mazzola said. "It's bipartisan and is a proven model."

The Congressional Research Service report cited by Levin and Dorgan said a renewed tax break may not stimulate the economy as much as its supporters claim.

The effect of stimulating the economy would be "muted" because when companies' overseas earnings are brought to this country they are converted to US dollars, the report said. That would increase the price of the dollar, which would make US-made exports more expensive, it said.

"As a result, US exports would temporarily decline, further straining the economy and at least partially offsetting any stimulative effect of the repatriated earnings," the report said.

A June study by the Chicago-based accounting firm Grant Thornton LLP said 843 of about 10,000 eligible companies took advantage of the 2004 law, paying a cumulative $18 billion in taxes on $312 billion in repatriations.

More than 60 percent of the money was brought in from European subsidiaries. Almost 10 percent came from Bermuda and 5.5 percent came from the Cayman Islands, two countries with no corporate income tax.

Companies were supposed to use the money to create jobs in the United States or pay debt. They were prohibited from buying back shares or paying dividends with the cash.

The Senate committee is asking companies to quantify the number of US employees they had for each year from 2002 through 2008, tell what they spent on research and development and explain any stock repurchases for the same years.

Companies and the US Chamber of Commerce are urging a second repatriation holiday, saying the influx of cash would help ease liquidity problems at companies.

Congress is also considering an alternative proposal that would let companies borrow cash from their foreign subsidiaries for up to two years without triggering a tax.