When a technology entrepreneur created an industry-changing AI product with a colleague in Beijing, little did he consider that he now owned a multimillion-dollar intellectual property asset — unprotected and subject to U.S. income tax, estate tax, and extensive reporting obligations. This is the unspoken reality for many multinational innovators and investors. While focus is often on seed funding, scaling, and corporate infrastructure, individual consequences — cross-border tax, valuations, succession planning, and asset protection for intergenerational wealth preservation — are frequently an afterthought.
The U.S. AI Action Plan And Individual Tax
Released in July 2025, the U.S. AI Action Plan sets out more than 90 initiatives to accelerate adoption of artificial intelligence, expand infrastructure, and strengthen the nation’s role in international diplomacy. The framework positions the United States to pursue global dominance in AI by prioritizing development and innovation over regulation. Among its provisions are broad measures to promote research and technological advances, including a general reference to tax-free reimbursements for employer training supporting IP and innovation.
As with most infrastructure-oriented policy documents, the Plan offers little insight into individual tax consequences or cross-border risks. It does not address valuation methodology for intellectual property, the taxation of cross-border profits, or the navigation of conflicting international tax regimes. For investors, founders, and entrepreneurs, this omission leaves a critical gap: corporate infrastructure development and policy frameworks may not anticipate how AI assets will be treated in succession planning, valuation, or personal tax compliance. Therefore, individuals should navigate these factors independently, even if their advisors or the underlying policy do not address them.
Determining Taxable Locations For Intellectual Property
Intangible assets, such as IP, are by their very nature not fixed to a location - unless a government body wants to tax them - then they have a location. The domestic and international protections afforded by patents, trademarks, copyrights, and trade secret law supports the need for identifying the location of the IP. Patent box regimes in the EU, incentivizing commercialization of innovation, R&D credits in Asia and in the U.S., among other innovation fostering tax incentives illustrate government interest in preserving IP value, especially where it has domestic impact. However, IP, and especially AI, as a system of codes and digital assets, are easily transferable globally. Both asset protection and tax incentives may drive an innovator to hold the IP offshore or abroad, but the global U.S. tax system creates burdensome tax compliance and liabilities. Some of the tax and reporting exposure occurs due to taxable income being in Controlled Foreign Corporations (CFC), subject to Global Intangible Low-Taxed Income (GILTI) (now, Net CFC Tested Income (NCTI)) treatment, and otherwise falling within the scope of Subpart F (foreign sourced or foreign derived) income.
Therefore, the tax implications on the individual investor or innovator may differ from the corporation or entity holding the IP.
OECD and Global Minimum Tax
AI and intellectual property overall is in the global forefront more than ever before. The OECD, the international collaboration forum for policy-making, has also focused its policies on the taxation of intangibles. The OECD’s Pillar Two framework imposes a 15% global minimum tax based on the residence of the corporation and focusing on mobile intangible income. The U.S. is not a member of the OECD.
However, investments are multinational and often subject to multijurisdictional demands. Companies growing rapidly, as is the case for most successful AI companies, from seed funding to international operations, may be subject to OECD even though they were not initially. When tax reform is heavily focused on intangible income, AI businesses fit squarely within the target zone because their value and income is significantly, if not entirely, based on intellectual property, not physical assets.
Tax Exposure For Entrepreneurs
The location of the IP has several consequences for personal income and transfer tax purposes for entrepreneurs. Valuation of the IP is at the core of the tax implications. From concept to commercialization, tracing the valuation of the IP to ensure that asset protection strategies are properly aligned to protect the investor is critical.
Oftentimes, estate planning and asset protection are not prioritized because most AI startups do not have liquidity to support a high value for the investor. However, at the time of exit, or scaling, when liquidity events occur, the investor or founder often faces an insurmountable personal tax liability with few channels to offset the liability. Additionally, hurried or reactive infrastructure development may expose the investor to significant foreign asset reporting and tax burdens (NCTI, for example) that could have been mitigated if a multi-disciplinary framework had been considered. Structuring to allow for some flexibility in the location of IP or the ownership structure of the IP can mitigate capital gains and allow for valuation discounts when a liquidity event is anticipated.
Estate Planning and asset protection are often treated as separate from corporate structuring, especially for founders and startups. Additionally IP asset protection is often deemed to be within the realm of patent prosecution or trademark filings. Asset protection should incorporate determining and preserving the value of the asset, and IP is no different. Several of the trust and holding company structures used in wealth preservation is applicable to intangible also, but the valuation methodology, transfer and licensing impact, and overall succession planning relies on an interplay with the IP protections through the patent and trademark systems, corporate structuring and investment analysis. The best time to incorporate succession planning may be at inception of the IP, not merely at exit.
Modern Family Offices and Intergenerational Wealth Preservation with IP
For family offices and institutional investors, treating IP as a corporate asset alone and separate from an estate asset can have dire consequences. If the underlying asset is improperly structured, or its value is not properly determined, it can trigger significant estate and gift tax on transfers, fiduciary litigation, or foreign compliance and tax reporting hurdles.
As family offices grapple with modernizing with technology, they have to also address whether the IP their clients own are adequately identified, valued, and protected. The underlying structures, whether trusts or holding companies may not survive cross-border scrutiny and the assets may be subject to global exposure. Without cross-border and IP proficient planning, families may lose value and control over their core assets.
The Policy Opportunity
The U.S. AI Action Plan focuses on supporting domestic innovation. However, the U.S. tax system, being only one of two global tax regimes, may incentivize foreign tax exposure for IP especially where it can be placed favorably. IP holding companies abroad provide liability and tax-efficiency that may surpass the current U.S. system but for the investors and innovators within those enterprises, the offshore structures create a hefty trade-off. They may be subject to significant individual tax exposure and reporting obligations. If an investor who has not sold the IP expatriates for example, valuation of the interest will be included in determining the investor’s net worth and may subject the investor to unexpected taxes as a covered expatriate, for both income and estate tax purposes.
For entrepreneurs and investors seeking to maximize returns from the policy, they should consider a multi-disciplinary approach and develop a protective framework that protects not only their corporate interest but also their individual interest, for both immediate and succession goals. Navigating technical proficiency in the IP itself, along with related areas in finance, tax, and law are essential to build an adequate framework.
Technology As A Taxable Asset
AI is a core taxable asset for innovators and investors. AI is directing compliance, valuation, and succession. Planning to mitigate tax-impact once with IP once it is structured is limited— transfer pricing, exit taxes, and valuation complicate mitigate strategies. Investors and entrepreneurs who plan early can align location, governance, tax, and wealth preservation before growth limits options. Innovation has limited impact without the appropriate structure to preserve its value and enable its growth.