Changing Organizational Complexity: The Role of the International Provisions of Public Law 115-97

• In Event: Tax Policy and MNE Investment

Abstract

In this paper, we study the organizational structures of U.S. multinational enterprises (MNEs). We begin by describing the ownership of MNEs’ foreign operations including controlled foreign corporations (CFCs), disregarded entities (DREs) and foreign partnership at the time of Public Law 115-97 (colloquially known as the Tax Cuts and Jobs Act or TCJA). Using data from Forms 8858 and 5471, we infer how organizational structures changed due to the introduction of country-by-country reporting as well as the US’s shift to a quasi sourced-based system of taxation. Although prior research has documented the large uptick in foreign entities associated with the “check-the-box” regulations (Robinson and Lewellen, 2014; Blouin and Krull, 2019), the effect of recent international tax reforms on MNEs’ organizational complexity (or, simplification, as may be the case with the TCJA) remains understudied. While predominantly descriptive in nature, we investigate the relationship between structure changes and the significant increase in royalty income for US corporations.

Authors

• Jennifer Blouin, University of Pennsylvania - Wharton

• Tim Dowd, Joint Committee on Taxation

• Paul Landefeld, Joint Committee on Taxation

• Jacob Mortenson, Joint Committee on Taxation