Tax Change Aims to Lure Intellectual Property Back to the US (wsj.com)

U.S. companies rich in intellectual property are looking at a new tax-friendly regime: the U.S (Editor's note: the link may be paywalled; alternative source). From a report: A provision in the newly revised U.S. tax code slashes the income tax companies pay on royalties from the overseas use of intellectual property or so-called intangible assets, such as licenses and patents. The new tax break, for what is dubbed foreign-derived intangible income, effectively reduces tax on foreign income from goods and services produced in the U.S. using patents and other intellectual property to 13.125% until the end of 2025, after which the rate rises to 16.4%. Previously, royalties paid to a unit in the U.S. would have been taxed similarly to other U.S. income, for which the top corporate tax rate was 35%. The new headline corporate rate is 21%. The deduction is meant to induce companies with large U.S. operations and significant foreign income from patent royalties to base more of those assets in the U.S. Such companies, especially in technology and pharmaceutical sectors, often hold foreign rights for their IP in a company based in a low-tax country.

Comments

Re: A good first step.

[Anonymous Coward]

Trump is a proven traitor ....

I'm curious - what color is the sky on the planet you're phoning this claptrap in from?

I'm just waiting for the proof that Obama, his DoJ, and the FBI not only colluded in giving Hillary! a pass on her email server, but also weaponized the US intelligence agencies against Trump - illegally using the FBI to create the Trump "dossier", getting DNI Clapper to brief it to Obama so it gets in the press, then after Hillary loses anyway, used that same fake dossier to get a FISA warrant to wiretap Trump, then had Susan Rice illegally unmask US citizens.

Then, we can get on to how the crooked investigators working for Mueller lost all those text messages from the time all that was happening.

Re: A good first step.

[cayenne8]

For a small "income pass-through" business, incorporation will probably cost more in administrative overhead than saved in taxes. I investigated this with my tax person considering the new tax law as we just came into possession of a small farm with a cash flow of ~$50 - $75k. She indicated the overhead costs would be too much unless cash flow was much larger. I think she was talking hundreds of thousands or at least $1 million.

It absolutely is not.

I have an S-Corp, and work through it as sole employee and owner.

What overhead costs?? Yes, I pay a CPA at end of year to do my taxes, but during the year, its just me and it isn't *that* much extra work, and it isn't rocket surgery.

And it is worth it...I can now write off most anything that is even remotely related to current work or work I wish to pursue.

I also, save on employment taxes (SS/Medicare) and do not have to pay that on the full amount I bill on.

You pay yourself a "reasonable" salary, and that is the amount you pay SS/Medicare on.

Example:

You Bill $100/yr.

You pay yourself a reasonable salary of say, $40K. Out of this mostly, you give yourself a paycheck...and the company pays state/federal/SS/Medicare based on this.

At EOY, from that remaining $60K, after you deduct for all expenditures, retirement funding, etc....what's left falls through onto your personal taxes, and you only pay state/federal tax on that.

I just keep records during the year, I log onto state and fed websites monthly and quarterly to pay taxes....and send paper work to CPA at EOY and she tells me what extra I pay..

and, by the way, during the year, that extra money is earning interest for me.

I am FAR from being a millionaire, I live basically an upper middle class lifestyle, and that little extra effort, is worth it for me to keep more of my hard earned money.

And for once it is nice to see that I likely will be affected by this new tax law.

Its about time the small business guy caught a break.

The reason that some millionaires set up pass through type companies...is because its a fucking GOOD idea. Why not emulate what works...?

It cost very little extra but a bit of your time and effort.

Re: A good first step.

[cayenne8]

So, I'm guessing you live in a HIGH tax state like NY or CA?

You might wanna look into getting the local politicians to work for YOU and lower those taxes.

The fed shouldn't subsidize your state taxes being too high.....

Re: A good first step.

[Hal_Porter]

Crazed AC stalkers are the missing +5 Inciteful moderation for slashdot.