That's one way for loopholes to exist. Another way is for companies to pay/lobby politicians to write loopholes into tax laws.
> Laws have loopholes like code has bugs.
Sure. And software also has backdoors placed there intentionally by developers.
If a company misinterprets tax code, they will eventually have to pay the price for it.
And I feel like "loophole" doesn't do justice to the authority the US gov't has.
If Congress can't get their act together enough to write clear tax law, then they should go back and fix it. Don't blame the company for imperfect and imprecise language - they didn't write it.
They did change the law, and this workaround will stop working around 2020
Of course they have made an effort to fix this -- the recently passed tax reform bill makes this a thing of the past by dropping the tax rate for foreign profits to 0%.
In this particular case, it's probably not a loophole, since the behavior in question has been known for many years, and the US government has made no effort to change how the law fails to tax overseas income of corporations.
In many cases, tax law says or (implies) "you pay $X to us, but you get credit for tax paid to other countries".