Sure, foreign R&D still gets amortized over 15 years (NPV ≈59 % of a full write-off, so you “lose” ~8.6 % of your R&D spend in present-value terms, and only 6.7 % of the cost is deductible in year 1, creating a 19.6 % cash-tax gap).

But offshore wages are often 50–70 % below U.S. rates:

• Even after the slower amortization drag, hiring at half the cost nets you ~30 % total savings on R&D headcount.

• On a pure cash basis you only need ~20 % lower wages to break even; most offshore markets easily exceed that.

• So the labor-cost arbitrage far outweighs the tax timing penalty unless your foreign salaries are less than ~20 % below U.S. levels.

In short: the 15-year amort rule hurts your tax deduction, but 50 %+ lower offshore wages more than make up for it.

How does that actually work? Most large companies open foreign subsidiaries owned by the parent, for example “Microsoft” will own “Microsoft Canada” and employees working in Canada work for “Microsoft Canada” and NOT the main “Microsoft” company.

The R&D done by Canadians is booked against Microsoft Canada, so in my mind the Canadian laws around R&D would apply and not the USA laws of 15 years old amortization?

Am I missing something?

What qualifies as forein here? Employee located abroad, or hiring subcontractors from other countries?

Awesome, this literally could not be better for American tech workers.