Intangible property is made up of ideas that create new products or processes that help improve our lives.
Also known as knowledge-based capital, intangible property covers a variety of assets that can’t be seen or touched, but have inherent value. These include ideas, copyrights and patents, manufacturing processes and more. Intangibles can truly be found across all sectors of our economy – from pharmaceutical and biologic medicines, software and other high tech industries to chemicals and textiles. Some of the most important inventions of the last century have come from intangibles including biologic medicines that treat serious diseases, software and devices that have transformed how we work, communicate, and play and hi-tech manufacturing processes to develop high-quality products, among others.
Intangible property has long played a central role in driving growth in U.S. output, jobs and income – and this role will only become more important in the years to come. It doesn’t just benefit one company; it helps create entire new industries and give rise to significant economic growth.
Intangibles and the Tax Code
The U.S. currently operates under a worldwide tax system in which American global companies are taxed on any income earned overseas when it is brought back, or repatriated, to the U.S. The U.S. is one of the few developed countries that operates on this type of system. At the same time, we have the highest corporate tax rate in the Organisation for Economic Co-Operation and Development (OECD).
While policymakers have acknowledged the need for corporate tax reform, some recent proposals would treat intangibles unfairly despite their unrivaled contributions to our nation’s economy. The effect would be to create an unfair advantage for companies who don’t derive their income from intangible property, while significantly disadvantaging innovative U.S. companies as compared to their foreign competition.
To protect these assets and their vital contributions to the American economy, the U.S. tax code must not discriminate against any particular industry or type of income – including income from intangible property.