By Alex M. Parker

Law360 (July 28, 2020, 5:45 PM EDT) -- Sen. Lindsey Graham, R-S.C., has introduced legislation that would let companies repatriate intellectual property related to personal protection equipment without tax consequences.

The provision in S. 4324, introduced Monday, is meant to encourage companies to onshore medical supply chains, especially from China. It is one of many included in the Senate Republicans' coronavirus relief package, which has more than $1 trillion in new spending and another round of $1,200 payments for most Americans.

"The goal is to have 100% American-made in the strategic stockpile of PPE within five years," Graham said in a statement from his office.

While the 2017 Tax Cuts and Jobs Act allowed companies to bring foreign income home at a reduced tax rate, it left the tax structures — which often include the valuable intangible assets that generated that income — intact. The law also included new incentives for companies to hold intangibles in the U.S., but many companies have been slow to respond, wary of whether those parts of the law would survive a change in administration or Congress. Companies face a potential one-time increase in taxable income by bringing intangibles to the U.S., if those assets have gained value while overseas.

A bill authored by Rep. Darin LaHood, R-Ill., would exempt all companies from that one-time tax payment. Graham's legislation would apply only to intangibles involved in producing equipment for PPE, such as sanitizing supplies, ancillary medical equipment and clothing, although not pharmaceutical products or other medical supplies. 

The bill would also require that the federal government only purchase U.S.-made personal protective equipment, and would provide tax credits for companies to retrofit existing factories to produce protection equipment, as well as a 30% tax credit on some production costs.

Democrats have also looked to the tax code to move medical supply production to the U.S. in response to the coronavirus pandemic. A proposal from former Vice President Joe Biden, the presumptive Democratic 2020 nominee for president, includes the removal of TCJA provisions that critics claim incentivize companies to move facilities offshore, especially if they derive income from intangibles. Biden has also said he would create tax incentives for companies to make "designated critical products" in the U.S.

Graham's bill has been referred to the Senate Finance Committee. The committee's Democratic staff did not return a request for comment.

--Editing by Joyce Laskowski. 

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