The prevalence and determinants of stateless income

This research investigates the ‘stateless income’ tax strategies pursued by firms publicly listed in the United States. Stateless income strategies are employed by multinational corporations, American firms in particular, through a Double Irish Dutch Sandwich structure to reduce tax liabilities. By examining 700 listed U.S. firms over the period 2004-2013, this research finds that larger firms with higher levels of foreign income are more likely to adopt the Double Irish Dutch Sandwich structure. Additionally, multinational corporations engaged in Double Irish Dutch Sandwich structure are associated with lower effective tax rate compared to their domestic counterparties. Regression analysis demonstrates that a firm’s effective tax rates are associated with firm size, firm leverage, capital structure, capital mix and foreign income. We also find the development and investment in intellectual property is an important component in generating ‘stateless income’ and firms engaged in ‘stateless income’ strategies hold large amounts of cash outside of the US