When the tax code makes America the new tax haven
Taxpayer behavior responds more predictably to incentives than to policy statements. When lawmakers alter the relative value of locations, companies move profit-generating assets accordingly.
Intangible assets are the most responsive. Patents, trademarks, algorithms, and formulas lack a physical presence, so their location depends on legal ownership. When tax rules change, ownership structures adjust accordingly.
Recent changes in U.S. tax policy are prompting this shift.
The Policy Shift
Several American multinationals are now considering relocating valuable intellectual property to the United States.
Three policy changes are driving this discussion.
First, Congress expanded the export income deduction, now called Foreign-Derived Deduction Eligible Income (FDDEI). This regime lowers the effective tax rate on certain export income earned by U.S. corporations.
Second, profits earned in the United States are exempt from the global 15 percent minimum tax under the OECD framework. Without this exemption, highly profitable U.S. companies could face additional tax on domestic income.
Third, the federal corporate tax rate remains at 21 percent. Combined with the FDDEI deduction, the effective tax rate on some export-related income can be significantly lower.
Tax advisers report that these changes have revived discussions companies paused during global minimum tax negotiations. Firms with significant research and development operations are reviewing supply chains, cost-sharing agreements, and intellectual property ownership.
Some companies are considering fully migrating existing intellectual property to the United States. This approach may trigger exit taxes imposed by the foreign country losing the asset.
Others are choosing a slower strategy. They may leave existing intellectual property offshore but ensure that newly developed assets are owned by U.S. entities in the future.
In both cases, the key decision is where future income from intangible assets will be taxed.
The Pattern Beneath the Decision
This trend reflects a recurring pattern in international tax systems.
For years, multinationals shifted intellectual property to low-tax jurisdictions. The strategy was simple: recognizing profits from intangible assets in lower-tax jurisdictions reduced the company’s overall tax burden.
Governments responded by tightening rules on transfer pricing, controlled foreign corporations, and global minimum taxes. These policies sought to reduce the benefits of locating profits in low-tax countries.
The current U.S. policy mix shifts the comparison once more.
When the United States offers a low effective rate on certain export income and exempts domestic profits from the global minimum tax, it becomes a competitive location for intellectual property ownership. The decision is practical, based on where future income will be taxed.
This results in a reversal of previous behavior. Rather than exporting intellectual property to lower-tax jurisdictions, companies are now assessing whether the United States offers a more favorable environment.
This does not eliminate conflict; it shifts where the conflict arises.
Transferring intellectual property between related entities requires valuing the asset. Transfer pricing rules mandate that the price reflect what independent parties would pay in a comparable transaction.
In practice, valuation becomes the central point of dispute.
If the asset is undervalued, the tax authority in the jurisdiction from which the asset is being removed may claim that profits were improperly shifted. If the acquisition is overvalued, the acquiring jurisdiction may challenge the buyer's deduction or amortization.
Because the assets involved often generate billions of dollars in future income, valuation disagreements can lead to extremely large disputes.
Lessons for Practitioners
Incentives determine asset location. Intellectual property moves to jurisdictions that offer the most favorable combination of tax rates and stability.
Policy changes affect planning cycles. Companies often delay major restructurings until international negotiations or legislation provide clearer long-term conditions.
Transfer pricing serves as the enforcement tool. When intellectual property crosses borders, valuation disputes are the primary means by which tax authorities challenge transactions.
Coordination among agencies is increasing. Tax and customs authorities now share information to evaluate the pricing and economic substance of cross-border transfers.
Large disputes often arise years after restructuring. Audits and litigation follow when tax authorities review the actual performance of transferred assets.
The Human Element
These decisions require organizations to balance legal risk, operational needs, and financial reporting pressures. Tax, finance, and legal teams must agree on a structure that meets business objectives and regulatory requirements. When assets capable of generating billions are reassigned, the internal decision process can be as complex as the external tax rules.
Forward View
Renewed interest in locating intellectual property in the United States is likely to create a cycle familiar to international tax authorities.
Companies will restructure ownership of intangible assets. Governments losing tax base will scrutinize the valuations used in these transfers. Transfer pricing disputes will follow as tax authorities seek to protect their share of future profits.
Meanwhile, countries will continue adjusting their tax systems to remain competitive for mobile capital. Each change shifts the comparative advantage among jurisdictions.