President Obama’s tax reform proposal this month has some language hinting at what IP valuators, transfer pricing professionals and corporate tax strategists should be looking for in 2012. “… there is evidence of income shifting offshore, including through transfers of intangible rights to subsidiaries that bear little or no foreign tax. Under the proposal, if a U.S. parent transfers an intangible to a controlled foreign corporation (CFC) in circumstances that demonstrate excessive income shifting from the United States, then an amount equal to the excessive return would be treated as subpart F income … The definition of intangible property for purposes of the special rules relating to transfers of intangibles by a U.S. person to a foreign corporation and the allocation of income and deductions among taxpayers would be clarified to prevent inappropriate shifting of income outside the United States.”
It’s become a political issue, but vague terms such as “excessive” and “inappropriate” indicate this movement is in its seminal stages. Nonetheless, researchers should take care to do their homework. Readers tasked with pricing these types of transfers should know that the full text, IP license agreements in ktMINE are being used by transfer pricing specialists and taxing authorities throughout the world to find relevant comparables, as over 70% of the agreements involve territories outside the U.S. Having access to the full text, having the ability to find and eliminate related-parties agreements, utilizing the analysis center to offer an immediate statistical breakdown of a given search set of agreements, and being able to completely document the research are a few of the reasons why.