The state of Louisiana gives a 35% state payroll tax credit on all Louisiana labor directly involved in the development of video games (and so doesn’t include administration or executive work) and a 25% tax credit on all the direct support costs such as premises leases, computers and training. The state estimates these reliefs reduce the cost of doing business in the games industry in the state by around 30% overall.
Wanted: A Tax Code for the Digital Age – BusinessWeek – discusses how Amazon reduces its tax bill, compared to similar bricks-and-mortar companies in the US, and refers to transfers of IP offshore, probably to a Luxembourg entity and how transfer pricing assisted a reduction of 6 percentage points in Amazon’s effective tax rate.
The US Treasury has released the 2012 Green Book (the catchier title for the “General Explanations of the Administration’s Fiscal Year 2012 Revenue Proposals” – the 2012 US Budget!). There are three key IP-oriented measures proposed. The first, discussed below, is taxation of “excess returns” on intellectual property. The second, to be discussed in a following blog post, seeks to limit shifting of income through IP transfers. Finally, and also to feature in a future post, is the enhancement and making permanent of the R&E (research and experimentation) tax credit.