Alvarez and Marsal, Taxand USA, predicts that the United States is to be seen as a viable intellectual property holding company jurisdiction.
In the debut edition of the A&M Tax Minute (titled IP Planners May be Humming a New Tune in Light of Pending U.S. Tax Reform), it was modestly predicted that a day could soon arrive where the United States might be seen as a viable intellectual property (IP) holding company jurisdiction. The premise at the time was based on the prospect of a lower corporate income tax rate (estimated between 15 percent and 20 percent at the time) and a potential zero-rated regime for the export income attributable to IP under the now defunct “Border Adjustment Tax” (BAT).
Later, with the slow death of the BAT in our wake, it was more cautiously predicted that IP migrations could be “back in the game” (see IP Migration Back in the Game after BAT gets Thrown Out). This was prompted by the buzz from Capitol Hill on the movement towards a “territorial system” in which IP income earned abroad might be permanently exempt when earned through a Controlled Foreign Corporation (CFC). The assessment proved to be accurate based on recent provisions contained in the House Bill which were perfectly aligned with the Senate Plan with respect to a territorial regime for 10 percent or greater foreign owned corporations.
Discover more: The prospect of a U.S IP holding company re-emerge
Author: Kenneth Dettman
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As a caveat, it was subtly noted in the prior article on the possibility of a tax on “excess earnings” from foreign IP ownership. Despite the high batting average on these predictions, we were caught looking upon the release of the base erosion and high foreign return provisions from both the House Bill and Senate Plan, and perhaps more importantly, the Senate’s favorable IP provisions.
