TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, October 18, 2018

Trump’s Tax Law Failed To Kill Off Corporate America's Prized Dodge

Bloomberg, Trump’s Tax Law Failed to Kill Off Corporate America's Prized Dodge:

U.S. corporations have largely abandoned the contentious deals that allowed them to shift their addresses abroad for a lower tax rate. Yet a key part of the transactions is continuing quietly even after President Donald Trump’s tax overhaul.

The 2017 tax law was designed to stop traditional inversions, which had brought scrutiny and negative publicity for companies that moved their headquarters overseas, as well as to halt the flow of valuable intellectual property to low-tax countries. For companies that invert, the address change is generally the final step so they can more easily access the cash they’ve generated after years of shifting IP

U.S. corporations have largely abandoned the contentious deals that allowed them to shift their addresses abroad for a lower tax rate. Yet a key part of the transactions is continuing quietly even after President Donald Trump’s tax overhaul.

The 2017 tax law was designed to stop traditional inversions, which had brought scrutiny and negative publicity for companies that moved their headquarters overseas, as well as to halt the flow of valuable intellectual property to low-tax countries. For companies that invert, the address change is generally the final step so they can more easily access the cash they’ve generated after years of shifting IP overseas.

Most firms are continuing with business as usual when it comes to their IP since the law’s provisions aren’t enticing enough for them to keep it at home, according to interviews with eight tax experts who advise large public corporations. They disclosed the details of the conversations they’re having with companies, but declined to identify the specific clients.

The problem: such IP moves mean that other countries ultimately get to collect the billions of dollars of tax revenue generated by many U.S.-made innovations, including life-saving drugs, the algorithms that power social media networks, and the software running computers and smartphones.

Bloomberg

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