The loophole allows self-dealing transactions to move local profits offshore.

Apple US buys iPods for $10 from China and sells in USA for $100. $90 profit, taxable, right? Wrong. Apple US licenses the Apple name from Apple Ireland for $89/iPod. Final tax sheet looks like:

Revenue: $100 cash from Apple store in San Francisco Expenses: $10 Apple China, $89 Apple Ireland

Taxable profit in USA: $1 (minus labor and such, of course)

Taxes paid to US government: minimal.

The profits from firms that do lots of business in the USA are being paperwork-shifted outside the country to evade taxes.

This has been covered extensively in numerous in-depth articles about major corporations and their tax schemes.