Bloomberg Law Quotes Jonathan Brenner: Companies Get Leniency in Made-in-America Export Tax Break

From airlines to defense companies, the new IRS regulations issued Monday make it easier for companies to claim a tax break for exporting their made-in-America goods and services. The release of the regulations give corporations a first look at what they need to do to claim a sizable deduction for the income they earn from selling goods and services made in the United States overseas.

The deduction for foreign derived intangible income, or FDII, was designed to encourage American companies to produce more in the U.S. The law cut the corporate tax rate to 21 percent from 35 percent and moved the U.S. toward a territorial tax system, so companies don’t owe the full U.S. tax rate on foreign income. The FDII provision works in tandem with the levy on global intangible low-taxed income, or GILTI, which taxes profits made in countries that didn’t tax them in the first place.

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FDII has received much less attention than GILTI from corporate tax accountants in the months following the tax law’s passage, said Jonathan Brenner, a member at law firm Caplin and Drysdale. Companies have been more focused on GILTI because it takes away something they used to have -- the ability to defer taxes on offshore cash indefinitely and now requires them to pay at least some tax on those profits.

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Excerpt taken from the article “Companies Get Leniency in Made-in-America Export Tax Break” by Laura Davison and Siri Bulusu for Bloomberg Law’s Daily Tax Report.