Within the last decade a growing number of countries have adopted some form of “patent box” or “innovation box” into their tax codes. So named because they can take the form of a check box on a corporate tax form, these policy innovations generally give companies a significantly lower tax rate on profits generated through patents, research, innovation, or other creative activity. Because the United States competes with these countries in a global market where capital and labor are increasingly mobile, it is important that lawmakers add an innovation box to U.S. corporate tax law. Otherwise, the United States will continue to lose global economic competitiveness, especially in innovation-based industries, and the jobs and economic activities that go with that. And with the implementation of the OECD base erosion and profit shifting (BEPS) package, other nations will likely insist on transfer of tangible economic activity from the United States in order to take advantage of their lower rates.
