Onshoring Incentives Gain Traction in Congress  

A drive to entice multinationals to move overseas manufacturing operations to the United States has gained traction with both parties on Capitol Hill as they frame competing plans for new tax incentives to include in possible virus relief legislation.

Within the last week, the White House disclosed it is exploring a massive “anchoring” tax cut for corporations if they bring their supply chains from overseas to the U.S. They have floated lowering the tax rate for companies that “onshore” their supply chains to 10.5 percent.

In Congress, the two sides agree the country needs tax changes to ensure reliable domestic sources for necessary tools to fight the novel coronavirus, including personal protection equipment, medical gear, pharmaceutical drugs, and vaccines.

At McGuire Sponsel, we are uniquely positioned to assist any company assessing the benefits of onshoring its existing supply chain, or otherwise entering the U.S. marketplace for the first time. There are numerous considerations when entering the U.S. market, including entity structures, tax obligations, and economic development incentives. In many cases, a company making an inbound move to the U.S. would seek assistance from a law firm, an accounting firm, and a credits & incentives (“C&I”) group. At McGuire Sponsel, we possess a unique solution set that enables us to provide a holistic approach to support inbound investments under one group.

Our international tax practice supports companies making a U.S. onshoring decision in multiple ways, including the following:

• Providing counsel with respect to choice of U.S. entity (LLC vs. corporation) and capitalization (mix of debt vs. equity);
• Drafting and delivery of required corporate governance documents, including Articles of Incorporation and Share Subscription Agreements;
• Legal entity formation/incorporation/registration;
• Provision of the required registered agent in the state of incorporation;
• Preparation of the U.S. federal income tax registration application (EIN); and
• Guidance as to related-party transaction flows (transfer pricing)

In addition to decisions related to corporate and tax structures, our C&I practice assists with obtaining economic development incentives and provides advice on which U.S. locations are best suited for long-term profitability (considering state/local taxes, logistics, labor costs, real estate costs, etc.). Economic development incentives may include training and certification grant dollars and services, tax exemptions, tax credits, tax abatements, lease savings, donated or reduced-price land, reduced-interest loans, waiver of permitting, zoning and utility connection fees, public infrastructure improvements, brownfield redevelopment funds, reduced utility rates/economic development riders, and other forms of savings and/or dollars.

McGuire Sponsel’s C&I services include the following:

• Nationwide site selection services
• State and local incentive analysis
• Incentive negotiation and procurement
• Compliance and reporting

As the onshoring discussion continues to evolve in Washington, McGuire Sponsel remains uniquely positioned and prepared to assist you and your clients with the many issues associated with making an efficient and economically sound inbound move to the U.S. Please reach out to our team members for more information.