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

Posted by msmash on from the interesting-moves dept.

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.

9 of 186 comments (clear)

  1. A good first step. by Anonymous Coward · · Score: 2, Insightful

    Another great example of Trump common sense. Now make inversions illegal and make work requirements for Medicaid mandatory. #MAGA

    1. Re: A good first step. by Anonymous Coward · · Score: 3, Insightful

      And this helps explain why middle class taxes are going up.
      Yay.

      And a couple of months ago, I'd bet quite a bit you were running around screaming "Pay your fair share!!!"

      All you care about is being NOT TRUMP. You don't give a shit about anything else other than beating Trump.

      So please just fuck off and die.

    2. Re:A good first step. by Hal_Porter · · Score: 3, Insightful

      The tax policy stuff isn't really Trump though. It's people like Paul Ryan. Trump is the Steve Jobs of the party - nasty but charismatic. Paul Ryan is more like the Wozniak - geeky but politically not that astute.

      In a odd sort of way the fundamentally corrupt nature of American politics works well for tax reform. If you have a bunch of lobbyists complaining all the time you can gain quite a bit of information from that. So if you know Apple and co have tonnes of money overseas, you can figure out what it would take to make them bring it back.

      Which, to the Trump administration's credit, they actually did

      https://www.bloomberg.com/news...

      Apple Inc. said it will bring hundreds of billions of overseas dollars back to the U.S., pay about $38 billion in taxes on the money and spend tens of billions on domestic jobs, manufacturing and data centers in the coming years.

      The iPhone maker plans capital expenditures of $30 billion in the U.S. over five years and will create 20,000 new jobs at existing sites and a new campus it intends to open. The Cupertino, California-based company's shares rose 1.7 percent to a record closing price of $179.10.

      âoeWe are focusing our investments in areas where we can have a direct impact on job creation and job preparedness,â Chief Executive Officer Tim Cook said in a statement Wednesday, which also alluded to unspecified plans by the company to accelerate education programs.

      You don't necessarily need to do what an individual lobbyist is lobbying for to make the companies they're lobbying for do what you want them to do.

      A combination of tax cuts policy wonkish stuffs like this and good old fashioned Trumpian bullying and intimidation to get companies to create jobs in the US should do the job. And of course Trumpian praise for ones who comply.

      Plus of course the Trumpian bullying and praise affects market cap

      https://finance.yahoo.com/quot...

      Apple's market cap is $886 billion. 1.7% of that is $15 billion. And they presumably reckon they'll make some more cash if public approval boosts their share price and on their business operations in the US.

      All in all it's an interesting mixture of conventional and unconventional incentives.

      --
      echo -e 'global _start\n _start:\n mov eax, 2\n int 80h\n jmp _start' > a.asm; nasm a.asm -f elf; ld a.o -o a;
    3. Re: A good first step. by Anonymous Coward · · Score: 2, Insightful

      Something is better than nothing. Nothing is what we currently receive when US companies move offshore for tax purposes. It's not a hard concept.

  2. so now more IP / patent trolls in the usa! by Joe_Dragon · · Score: 3, Insightful

    so now more IP / patent trolls in the usa!

  3. You are so full of shit by Anonymous Coward · · Score: 2, Insightful

    It is a bad thing, because it's just another tax break for companies that are already evading taxes, and it won't actually bring anything back into the US.

    Apple, Returning Overseas Cash, to Pay $38 Billion Tax Bill

    1. Re:You are so full of shit by Anonymous Coward · · Score: 3, Insightful

      Whoa, there, tiger. Lets stick to TFA here. We aren't talking about repatriated profits. we are talking about how taxes are calculated when a company licenses IP to a foreign subsidiary. Choosing what international branch licenses IP to what international branch doesn't actually move anything anywhere, its just numbers on paper. So while its true that this change could make those internal deals taxable in the US, that isn't really the point of this new tax loophole.

      The real point is to pay less tax in the case where you license to a foreign company that is not a subsidiary of the US company that owns the IP. This way, when US companies license their brands to foreign manufacturers, they will have a lowered tax burden. This is essentially how Trump's hotel business makes its money....

      Trump literally gave himself a tax cut and you are trying to defend it with an unrelated story about Apple repatriating overseas income.

  4. Re:I can see the CNN headline now by iggymanz · · Score: 2, Insightful

    false, you made that up.

    The majority of large companies *legally* do things to avoid taxes; now there is reason to do business here.

  5. Re:I can see the CNN headline now by zifn4b · · Score: 4, Insightful

    It is a bad thing, because it's just another tax break for companies that are already evading taxes

    Ok let's try your logic out here. By using Turbo Tax to comprehensively evaluate the tax code to get you the biggest tax refund aren't you also evading taxes by your definition? Corporations are basically using a more sophisticated version of "Turbo Tax" to lower their effective tax rate. Isn't that what you and everyone else is doing too? So much in fact that Turbo Tax, Tax Act, etc. all created profitable software businesses around it...

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