If I’m reading that right, that seems to be referring to foreign-originated IP, that’s been contributed to a Delaware corp, but is now being repatriated elsewhere to avoid Section 174. I assume the reason the associated software development activities are no longer subject to 174 is because there’s no longer a US taxpayer involved. Is this really applicable for US-originated IP? To the extent that there’s still US tax jurisdiction involved, doesn’t that just put you into the world of transfer pricing, GILTI and such?
I’m also fairly skeptical that this is all that much of a deterrent to doing business in the United States. The US had uncommonly high corporate tax rates until recently, and that didn’t seem to adversely affect economic dynamism. I mean, sure, one can avoid this particular taxation regime by (checks notes) moving the entire operation to another country, but that obviously sacrifices the advantages of doing business in the US (deep and liquid capital markets, well-known legal regime associated with investing in a Delaware corp, network and agglomeration effects, etc.) and the replacement jurisdiction is certainly going to have its own set of downsides.
I’m also fairly skeptical that this is all that much of a deterrent to doing business in the United States. The US had uncommonly high corporate tax rates until recently, and that didn’t seem to adversely affect economic dynamism. I mean, sure, one can avoid this particular taxation regime by (checks notes) moving the entire operation to another country, but that obviously sacrifices the advantages of doing business in the US (deep and liquid capital markets, well-known legal regime associated with investing in a Delaware corp, network and agglomeration effects, etc.) and the replacement jurisdiction is certainly going to have its own set of downsides.