Apple CEO Tim Cook testifies on Capitol Hill in Washington, Tuesday, May 21, 2013, before the Senate Homeland Security and Governmental Affairs Permanent subcommittee on Investigations as lawmakers examine the methods employed by multinational corporations to shift profits offshore and how such activities are affected by the Internal Revenue Code. Senate Homeland Security and Governmental Affairs Permanent subcommittee on Investigations Chairman Sen. Carl Levin, D-Mich., holds up his own Apple iPhone, on Capitol Hill in Washington, Tuesday, May 21, 2013, as he presses Apple CEO Tim Cook, left, for answers about how Apple, the world's most valuable company, and based in Cupertino, Calif., diverts a billion dollars to an Irish subsidiary as a tax strategy, according to a report issued this week by the subcommittee. Apple CEO Tim Cook, center, is surrounded by aides as finishes his appearance on Capitol Hill in Washington, Tuesday, May 21, 2013, before the Senate Homeland Security and Governmental Affairs Permanent subcommittee on Investigations as the panel examined the methods employed by multinational corporations to shift profits offshore and how such activities are affected by the Internal Revenue Code. Lawmakers pressed Cook to learn more about Apple's tax strategies in keeping a billion dollars in an Irish subsidiary, according to a report issued this week by the subcommittee. Senate Homeland Security and Governmental Affairs Permanent subcommittee on Investigations Chairman Sen. Carl Levin, D-Mich., holds up his own Apple iPhone, on Capitol Hill in Washington, Tuesday, May 21, 2013, as he presses Apple CEO Tim Cook for answers about how Apple, the world's most valuable company, and based in Cupertino, Calif., diverts a billion dollars to an Irish subsidiary as a tax strategy, according to a report issued this week by the subcommittee. WASHINGTON (AP) - The Senate dragged Apple Inc., the world's most valuable company, into the debate over the U.S. tax code Tuesday, grilling CEO Tim Cook over allegations that its Irish subsidiaries help the company avoid billions in U.S. taxes. Cook said the subsidiaries have nothing to do with reducing its U.S. taxes, a message he struggled to convey to the Senate Permanent Subcommittee on Investigations. The senate subcommittee released a report Monday that held up Apple as an example of the legal tax avoidance made possible by the U.S. tax code. It estimates that Apple avoided at least $3.5 billion in U.S. federal taxes in 2011 and $9 billion in 2012 by using its tax strategy, and described a complex setup involving Irish subsidiaries as being a key element of this strategy. Rather, the company avoids paying the 35 percent federal tax rate on profits made overseas by not bringing those profits back to the U.S., a practice it shares with other multinationals. Apple's enormous, iPhone-fueled profits mean that it has more cash stashed overseas than any other company: $102 billion. Cook reaffirmed Apple's position that given the current U.S. tax rate, it has no intention of bringing that cash back to the U.S. Like other companies, it has a responsibility to shareholders to pay as little as possible in taxes. In effect, Apple is holding out for a lower corporate tax rate, and Cook spent some of his time in the spotlight to advocate for one, accompanied by a streamlining of the tax code to eliminate deductions and credits. At the same time, Cook said he was happy to appear to be able to give Apple's side of the story. It was the first time an Apple CEO testified before Congress. Cook did so voluntarily. Apple uses five companies located in Ireland to carry out its tax strategy, according to the Congressional report. Therefore, the Apple companies aren't tax residents of Ireland or the U.S., since they weren't incorporated in the U.S., in Apple's view. The U.S. tax code contains provisions designed to force companies that sell their products overseas to pay U.S. taxes on the profits from those sales. But certain loopholes allow companies to legally bypass those provisions. The Irish subsidiaries are set up to take advantage of those loopholes, according to the committee's report. For instance, Apple has shifted intellectual property rights, like patents, to its Irish subsidiaries, which means other divisions of Apple pay royalties to those subsidiaries for their sales. Intellectual property rights, like patents, are Apple's "golden goose," Levin said. Apple executives countered that the main company has kept the rights for North and South America, so only royalties for overseas sales flow to the Irish subsidiaries. Also, the Irish companies pay for some of research and development costs incurred at Apple's headquarters in Cupertino, Calif. "What Apple is doing is pretty mainstream," said accounting expert Robert Willens, in an interview. Shifting around the intellectual property rights has a minor effect compared to the simple avoidance of U.S. taxes by not repatriating profits, he said. The spotlight on Apple's tax strategy comes at a time of heated debate in Washington over whether and how to raise revenues to help reduce the federal deficit. The debate has engulfed the capital, and it loomed large in Tuesday's hearing. Even if additional tens of billions from Apple began flowing into the U.S. Treasury, the money would barely put a dent in the $642 billion federal budget deficit. But Apple as a symbol resonates with politicians, especially Democrats, seeking to make the case that a powerful corporation shouldn't be excused from its fair share of taxes. At the same time, lawmakers must tread lightly as they attack Apple, a company held in high esteem and whose ubiquitous products are seen as both innovative and indispensable. "I love Apple," declared panel member Sen. Claire McCaskill, D-Mo., during the hearing, confiding that she had "converted" her husband to the MacBook. And Sen. John McCain of Arizona, the committee's senior Republican, took a break from grilling Cook on tax questions to ask him, "Why the hell do I have to keep updating the apps on my IPhone all the time?" While the two parties agree that reform is necessary, there is little agreement about what shape it would take. Throughout the hearing, senators on the panel seized on Apple's situation to illustrate their belief that the U.S. tax system is in dire need of repair. White House spokesman Jay Carney said the issue highlighted by the Senate panel's report, unfairness in the U.S. tax code, is one of longstanding concern to President Barack Obama. Carney said Obama has long favored proposals "to ensure that American companies cannot use off-shore profit shifting to avoid paying taxes," including a proposal for a minimum tax on foreign earnings. "This has been a major priority of his because he thinks it is inexplicable that our tax code would actually be written in a way that rewards companies for taking jobs and profits offshore, and thereby penalizes companies for doing what we want them to do, which is create jobs and opportunity here in the United States," Carney said Tuesday. Apple's stock fell $3.27, or less than one percent, to close at $439.66 in Tuesday's trading. And McCain condemned Paul's remarks as "offensive" for accusing Levin of bullying Apple executives. Levin called Ireland a "tax haven," an appellation Irish Prime Minister Enda Kenny rejected when speaking in parliament in Dublin on Tuesday. We are not a tax haven. American investors quite understand that. Our (taxation system) is statutory-based and clear and transparent and effective right across the board," Kenny said. He also denied the assertion in the subcommittee's report that Apple had negotiated an Irish corporate tax rate of less than 2 percent. Svensson contributed from New York.