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U.S. Firms Expand Global Supply Chains Amid Tax Breaks

10/1/2025

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Summary

Story summary

U.S. multinationals build supply chains with companies outside U.S.
IRS Letter Ruling 202502002 holds R&D income from U.S. affiliates to foreign parent companies qualifies as foreign-derived deduction-eligible income (FDDEI).
Foreign-Derived Intangible Income (FDII) regime, enacted in 2017, allows a 37.5% deduction.
R&D services must show foreign affiliates retain IP and bear risks; U.S. distributors do not benefit, ensuring 100% FDDEI.

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Story summary

U.S. multinationals build supply chains with companies outside U.S.
IRS Letter Ruling 202502002 holds R&D income from U.S. affiliates to foreign parent companies qualifies as foreign-derived deduction-eligible income (FDDEI).
Foreign-Derived Intangible Income (FDII) regime, enacted in 2017, allows a 37.5% deduction.
R&D services must show foreign affiliates retain IP and bear risks; U.S. distributors do not benefit, ensuring 100% FDDEI.