Boise Quoted in Plain Dealer Regarding Tax Implications of Eaton’s Irish Incorporation of Its New Merged Company

Dean Craig M. Boise

Eaton Corporation is buying a rival company and incorporating the new merged company in Ireland rather than the United States.   Eaton expects to save $160 billion in taxes annually as a result of the merger and Irish incorporation.  An article in the May 22, 2012 edition of The Plain Dealer, Eaton Corp. plans to buy Cooper Industries in a $11.8 billion deal; move incorporation to Ireland, by Robert Schoenberger, indicates that Cooper Industries is already incorporated in Ireland, where the corporate tax rate is 12.5 percent.  The U.S. rate is 35 percent.  Overseas incorporation will shield Eaton from some overseas profits, though it will continue to be responsible for taxes on income earned in the U.S.

According to Dean Boise, a “secondary benefit could come from patents and other intellectual property. When a company develops new technology, it tends to license those inventions to its own subsidiaries and other companies. If those patents are held in the U.S., the profits from those licensing fees generate U.S. profits. But if Eaton is an Irish company, it can hold those patents in Dublin, and licensing fees will be subject to that country’s lower rates.”

Boise stated that “[t]hat’s one of the biggest reasons that pharmaceutical and technology companies hold their intellectual property offshore, to avoid U.S. taxation.”

To read the article, click here: http://www.cleveland.com/business/index.ssf/2012/05/eaton_corp_plans_to_merge_with.html

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