(Corrects paragraph 5 to reflect that not all of Apple's intellectual property is assigned to foreign subsidiaries)
By Stephen Nellis
Dec 20 (Reuters) - The U.S. Republican tax overhaul passed by Congress this week will allow Apple Inc to bring back its $252.3 billion foreign cash pile without a major tax hit - a long-standing company goal.
Other provisions of the bill, namely the cut in the corporate tax rate from 35 percent to 21 percent, are also a big boon for Apple.
But not everything went the company's way. A critical difference between the Senate version of the bill and the final version could actually raise the amount of cash taxes that Apple pays on profits from patents held abroad, tax experts said.
The treatment of foreign patent profits is important to Apple because shifting those profits overseas was a cornerstone of its tax practices for decades.
In effect, the company attributes a large portion of the value of its products to patents and other intellectual property such as trademarks. Apple then assigns some of that IP, proportional to overseas sales, to subsidiaries in countries with low tax rates and assesses substantial patent royalties on sales. Those royalties then flow back to those low-tax locations, like Ireland.
The bill has a pair of provisions designed to make that maneuver less alluring. One creates a minimum tax on foreign patent income that is expected to come to about 13 percent, said Gavin Ekins, a research economist with the Tax Foundation.
At the same time, a tax break for patents held in the United States will lower the tax on licensing income from the standard corporate rate of 21 percent to 13.1 percent - about the same as if the patents were held abroad.
Congressional Republicans "don't want the tax rate to be a consideration in where you put your intellectual property," Ekins said. "The whole intention (of the measures) is to bring back that intellectual property to the United States."
Parts of the scheme are similar "patent boxes" employed in countries like the United Kingdom to encourage firms to generate and keep their innovations at home.
But the final bill omits any explicit way for patents held overseas to be returned to the United States without being taxed.
Congress "screwed it up," said Ed Kleinbard, a tax professor at the University of California and former chief of staff of the U.S. Congress's Joint Committee on Taxation. "It's kind of weird that they created the patent box, but didn't give a pass to bring things back."
For those patents that remain overseas, the minimum tax on foreign patent profits means Apple might actually face higher cash taxes abroad.