Innovation Promotion Act Would Mean Income Deductions for PatentsAugust 10, 2015

Currently tax law does not permit deductions or other preferential tax rules for income derived from intellectual property. Proposed tax reforms consider changing this. On July 29th the House Ways and Means Committee members Charles Boustany (R-LA) and Richard Neal (D-MA) released a legislative proposal for public comment outlining the Innovation Promotion Act that would, in part, provide a deduction for income generated from patents and other intellectual property.

The proposed innovation box is expected to accompany other tax reform plans to be considered by Congress. This draft proposal outlines signficant components of an expected international-only tax reform plan to be considered in fall 2015. Additional information about this proposal is available on the Ways and Means Committee site and includes a section-by-section summary.

An innovation box is expected to be a significant component of the international-only tax reform plan that Ways and Means Committee Chairman Paul Ryan, R-Wis., hopes to advance this fall to help finance a long-term extension of spending authority for the Highway Trust Fund. Boustany has been leading the committee’s efforts to develop international tax reform legislation and it has been widely reported that he and Neal worked with Ways and Means staff, the Joint Committee on Taxation staff, and the Treasury Department in developing the innovation box proposal.

Additional details on the discussion draft and the potential for near-term action on international-only tax reform legislation will be provided in an upcoming edition ofTax News & Views.