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Unpacking the Reporting Challenge in Patent Boxes

August 2015
Compliance Weekly

In an article published by Compliance Week on Aug. 18, 2015, Dave Taylor weighs in on patent boxes being added to tax returns and financial statements. Patent boxes are tax regimes that allow companies to use discounted tax rates on the income generated by some intellectual property. About a dozen companies have implemented patent boxes and lawmakers in Washington have taken notice. While the tax benefits of patent boxes can be substantial, companies that leverage these regimes need to consider legal, financial and operational implications. For publicly traded companies, disclosure requirements can also arise. For example, in April, the U.S. Securities and Exchange Commission (SEC) asked GlaxoSmithKline to explain why the benefit of its intellectual property incentives, as a percentage of profit before tax, changed dramatically from 2013 to 2014. Taylor says the SEC may have wanted to ensure the information was disclosed accurately. Or “it may just be the SEC being curious,” he added. The U.S. does not have a patent box regime, and the SEC might simply want to earn more about them and how they will affect corporate financial disclosures. Subscribers may access the full article here.