Google's 'Alphabet Soup' in Delaware

31 Pages Posted: 23 Apr 2016 Last revised: 29 Apr 2016

See all articles by Bret Bogenschneider

Bret Bogenschneider

University of Surrey - School of Law

Ruth Heilmeier

Cologne Graduate School in Management

Date Written: February 18, 2016


In this article the tax avoidance planning of Google’s “Alphabet” Delaware reorganization is explored in detail. The recent Google reorganization created an IP parent holding company in Delaware (“Alphabet”) yielding potential state corporate income tax avoidance benefits, including: (1) incremental royalty expense deductions in non-combined reporting states; (2) potential exclusion of foreign royalty income from the tax base in combined reporting states; (3) creation of a constitutional challenge to the taxation of foreign royalty income of Alphabet; and (4) domestic IP license benchmark for foreign affiliates to allow for repatriation of offshore cash by higher royalty payments. The article suggests that U.S. states are not obliged to follow a formalistic method of legal interpretation of tax transactions that lack economic substance (i.e., to recognize the Alphabet reorganization), and further addresses Google’s corporate slogan “don’t be evil” in light of its aggressive federal and state tax avoidance behavior.

JEL Classification: K34

Suggested Citation

Bogenschneider, Bret and Heilmeier, Ruth, Google's 'Alphabet Soup' in Delaware (February 18, 2016). 16 Houston Business and Tax Law Journal 1 (2016) lead article, Available at SSRN:

Bret Bogenschneider (Contact Author)

University of Surrey - School of Law ( email )

United Kingdom

Ruth Heilmeier

Cologne Graduate School in Management ( email )

Cologne, 50923

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