Key Points
- The U.S. has long been an attractive parent-company jurisdiction for multinational companies for non-tax reasons, including stable corporate law and deep, sophisticated capital markets.
- Recent U.S. tax reforms have eliminated some of the tax costs of being U.S.-parented. The U.S. now offers a combination of competitive tax rates, regulatory certainty, a familiar legal environment and access to deep capital markets.
- That said, domestication to the U.S. potentially brings other tax complexities, including exposure to U.S. rules on controlled foreign corporations, the corporate alternative minimum tax and U.S. withholding taxes.
- U.S. Treasury regulations can impose shareholder-level taxes on domestication transactions depending on how they are effected, making the method of domesticating particularly important.
- The decision whether and how to domesticate to the U.S. is highly fact-specific and depends on each company’s global footprint and business objectives, so companies must carefully weigh all benefits and costs.
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Why Are Companies Domesticating to the US?
The U.S. has long been an attractive parent-company jurisdiction for multinational enterprises for a variety of non-tax reasons. At the same time, until recently the U.S. was a relatively unattractive parent-company jurisdiction from a tax perspective. However, recent shifts in U.S. tax rules are prompting multinational groups to reconsider that cost-benefit calculus.
The One Big Beautiful Bill Act (OBBBA) recently made changes to certain aspects of the U.S. international tax regime, including:
- Making permanent many favorable measures enacted under the 2017 Tax Cuts and Jobs Act (TCJA).
- Modifying the taxation of global intangible low-taxed income (GILTI, now “net CFC tested income” or NCTI) and foreign-derived intangible income (FDII, now “foreign derived deduction eligible income” or FDDEI). (See our July 15, 2025, client alert.)
In this article, we discuss how these developments are prompting multinational groups to consider domesticating to the U.S. While our focus is on U.S. tax developments, international tax rules are continuing to evolve at the same time, most notably the Organisation for Economic Co-operation and Development’s (OECD’s) Pillar Two global minimum tax rules and the “side-by-side” system intended to permit U.S. multinationals to apply the U.S. worldwide tax system in lieu of the OECD’s GloBE model rules. (See our January 12, 2026, client alert.)
Non-Tax Reasons to Domesticate Into the US
Non-tax reasons have historically driven multinational groups to locate — or relocate — their headquarters into the U.S., including:
- Access to capital markets. The U.S. boasts the world’s largest and most liquid capital markets, providing easier access to public and private funding, broader investor bases, valuable inclusion in stock indices (which is unavailable even to companies listed in the U.S. through American depositary receipts (ADRs)), and higher valuations and multiples for publicly traded companies.
- Investor protections. Investors in U.S.-parented multinationals are generally guaranteed (i) more information (e.g., regular Securities and Exchange Commission reporting) under familiar terms (e.g., under U.S. GAAP rules rather than local IFRS), and (ii) greater participation rights in corporate transactions (e.g., rights offerings, which often exclude ADR holders). These protections contribute to the higher valuations and multiples for U.S. public companies.
- Familiar corporate law and regulatory environment for management. U.S. corporate law is widely regarded as predictable and business-friendly, providing comfort to management, including with respect to management’s duties.
The Reduced or Eliminated Tax Cost of Domesticating to the US
Recent changes to U.S. tax rules make the U.S. an increasingly attractive jurisdiction, including:
- TCJA. TCJA reduced the headline corporate tax rate to 21%, with lower effective rates for GILTI income earned by foreign affiliates and FDDEI earned by domestic affiliates.
- OBBBA tax rate permanence and international reforms. OBBBA generally made TCJA’s rate reductions permanent (including a 14% effective rate on FDDEI), providing long-term certainty; introduced a variety of technical changes that increase the availability of U.S. foreign tax credits on NCTI; made the FDDEI deduction more attractive; and introduced a 100% depreciation allowance for qualified production property.
Additionally, while domesticating may not have a direct impact on U.S.-imposed tariffs, it may support shifting production or supply chains to the U.S., which, in turn, may reduce costly U.S.-imposed tariffs.
That said, U.S.-parented groups still need to navigate the broad applicability of the U.S. Subpart F, NCTI and corporate alternative minimum tax regimes that potentially impose U.S. tax, at varying rates, on the worldwide income of U.S. parent corporate groups. Thus, careful consideration must be given to the potential costs that these regimes could impose following a domestication transaction.
How to Domesticate: Beware the 367(B) Toll Charge
In circumstances where domesticating a multinational group’s headquarters may be attractive, the group must carefully consider how to effect the move:
- Domesticating a multinational group’s headquarters to the U.S. can take different forms, including tax-free reorganizations or taxable transactions that can result in a stepped-up asset basis.
- Companies should carefully consider the precise method for domesticating and the potential application of the regulations under Section 367(b). Those regulations can impose tax on the shareholders of a domesticating company, even where the transaction is otherwise structured as a tax-free reorganization — for example where the non-U.S. parent company merges into a new U.S. parent company.
- While alternative structures may be available to mitigate that shareholder tax (e.g., a share-for-share exchange that qualifies as a tax-free transaction under Section 351 or 368(a)(1)(B)), such alternatives may not be available under local law and may result in company-level tax inefficiencies going forward.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.