Monday 15 July 2013

The Patent Box Coming to the United States Soon?

Congresswoman Allyson Schwartz recently introduced a bill in the House of Representatives to establish a patent box similar to that adopted by some European countries (she previously introduced the bill in 2012 and here is the press release for that bill).  The bill provides a lower tax rate on profits from the exploitation of patented technology developed in the United States.  The patent box is designed to lure entities to the home of the box and thus, create jobs.  The effective tax rate for qualifying profits appears to be 10%.  Here is a link to the proposed legislation and links to several news articles about the 2012 and 2013 proposed legislation here, here and here.  In a helpful 2012 article by Pricewaterhouse Coopers, Is it Time for the United States to Consider the Patent Box, the authors state:

According to the most recent OECD data, as of 2009 the United States ranked 24 out of 38 countries (including 32 OECD members plus Brazil, China, India, Russia, Singapore, and South Africa) in the value of tax incentives provided per dollar of R&D. Because the U.S. research credit expired December 31, 2011, the U.S. incentive provided for R&D is now even lower than indicated by the OECD ranking.

Moreover, according to 2011 OECD data, the combined federal and average state statutory corporate tax rate in the United States (39.2 percent) is second highest among OECD countries, and more than 14 percentage points greater than the average for the other countries (25.1 percent). Therefore, royalty and license income earned from U.S.-held IP is taxed at a 50 percent higher rate than IP held in the average OECD country. The disparity in taxation of IP is even greater when compared with countries with patent box regimes, where qualified IP typically is taxed at rates between 5 and 15 percent.

The time appears to be closer.  What do you think?  The article also has a useful chart comparing patent box legislation in Belgium, France, Luxemburg, Netherlands, Spain and the U.K. 

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