The One Big Beautiful Bill: International Tax Implications

There are key provisions in the One Big Beautiful Bill (OBBB) that have international tax implications.

H.R. 1, formally titled “An Act to provide for reconciliation pursuant to Title II of H. Con. Res. 14,” commonly referred to as the One Big Beautiful Bill, spans more than 1,100 pages and introduces sweeping changes across the tax landscape.

Our previous articles took a closer look at how the One Big Beautiful Bill affects businesses and tax-exempt organizations, individual taxpayers along with estate and gift taxes, and state tax changes and what was left out of the final version of the bill. In this article, we focus on OBBB’s impact on taxpayers doing business globally.

The Impact of the OBBB on U.S. International Tax Regime

The Bill makes modifications to the existing U.S. international tax regime in a number of key areas, including:

• Global Intangible Low-Taxed Income (GILTI):
  • Replaces the term “Global Intangible Low-Taxed Income” (GILTI) with “Net CFC Tested Income (NCTI)” throughout the tax code.
  • The deduction for NCTI (formerly GILTI) under Section 250 is reduced from 50% to 40%.
  • Eliminates the net deemed tangible income return (NDTIR), which had allowed for a 10% return on qualified business asset investment (QBAI) to be excluded from tested income for GILTI purposes.
•  Foreign-Derived Intangible Income (FDII):
  • Replaces the term “Foreign-Derived Intangible Income” (FDII) with “Foreign-Derived Deduction Eligible Income” (FDDEI).
  • The deduction for FDDEI (formerly FDII) under Section 250 is reduced from 37.5% to 33.34%.
  • Excludes gains from the sale or disposition of intangible property and other depreciable property from the calculation of deduction eligible income (DEI).
  • Eliminates reduction for 10% return on QBAI from the calculation of FDDEI.

• Extension and Modification of Base Erosion Minimum Tax Amount (BEAT)

• • Increases rate from 10% to 10.5%.
  • Base erosion percentage threshold will remain at 3%.
  • Permanently excludes certain tax credits from reducing regular tax liability when calculating BEAT tax liability.
• Permanent Extension of CFC Look-Through Rules:
  • Makes permanent the existing look-through exclusion from Subpart F income provided under Section 954(c)(6), which was scheduled to expire. This rule excludes from foreign personal holding company income (and potential inclusion under Subpart F rules) certain payments of dividends, interest, rents and royalties received by a CFC from a related CFC where the payments are not reducing Subpart F income of the CFC making the payments.
• Restoration of Section 958(b)(4) Limitations on Downward Attribution:
  • Restores application of Section 958(b)(4), which had been repealed under the Tax Cut and Jobs Act in 2017, and limits downward attribution of ownership of shares in foreign corporations owned by non-U.S. persons to U.S. persons when determining U.S. shareholder and CFC status. This previous repeal had resulted in an overly broad application of the downward attribution rules to cause foreign corporations to be viewed as CFCs even in cases where there was no actual majority control by U.S. shareholders.
  • Introduces Section 951B to provide for downward attribution of ownership in a more targeted way, focusing on “foreign-controlled U.S. shareholders” and “foreign-controlled foreign corporations” and thus preserving applicability of Subpart F and GILTI inclusion rules and compliance reporting to structures within the scope of these provisions.
• Repeal of Election for One-Month Deferral of Tax Years of Specified Foreign Corporations (SFCs)
  • One-month deferral election under Section 898(c)(2) is repealed.
  • Prescribes transition rule for SFCs to adjust to a conforming year-end for tax years beginning after November 30, 2025.

• Modification to CFC Pro Rata Share Inclusion Rules

• • Modifies existing pro rata share rules to require U.S. shareholders to include their share of Subpart F income if the U.S. shareholders own stock on any day during the CFC tax year as opposed to just those who hold shares on the last day of the CFC tax year.
• Modifications Related to Foreign Tax Credit Limitation
  • Precludes allocation and apportionment of interest expense or research and experimentation expenditures to NCTI (formerly GILTI) basket income for purposes of the foreign tax credit limitation. Aside from Section 250 deduction and taxes on NCTI inclusions, only deductions directly allocable to NCTI income will be allocated against NCTI basket income for purposes of the foreign tax credit limitation.
  • Modifies deemed paid credit allowed under Section 960 for foreign taxes applicable to tested income by increasing the allowable percentage from 80% to 90%.
  • Disallows a foreign tax credit for 10% of any foreign income taxes paid or accrued on distributions of previously taxed NCTI of a CFC. Applies to taxes on such distributions made after June 28, 2025.
  • Changes sourcing rule applicable to sales of inventory produced in the U.S. and sold outside the U.S. through foreign branches to limit foreign source treatment for foreign tax credit purposes.

If you have questions about how the OBBB may affect you or your organization, please reach out to us at [email protected].

This article is part of our ongoing series on the potential impact of the One Big Beautiful Bill. You may view our full library on our OBBB Resource Center.

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