U.S. taxpayers with international operations continue to navigate a rapidly evolving tax environment. The One Big Beautiful Bill Act (“OBBBA”), signed into law in July 2025, introduced several significant changes to the U.S. international tax framework, modifying provisions originally enacted under the 2017 Tax Cuts and Jobs Act (“TCJA”).
Below, we highlight key updates and practical considerations for multinational businesses and U.S. investors.
GILTI Refined and Renamed Net CFC Tested Income (“NCTI”)
Prior Rules
Under pre-OBBBA law, Global Intangible Low-Taxed Income (“GILTI”) subjected certain foreign earnings of controlled foreign corporations (“CFCs”) to an effective 10.5 percent U.S. tax rate through a 50 percent Section 250 deduction. The calculation excluded a deemed return on qualified business asset investment (“QBAI”) reduced by certain interest expense, known as the net deemed tangible income return (“NDTIR”). Foreign tax credits (“FTCs”) were limited to 80 percent of eligible foreign taxes.
New OBBBA Rules
OBBBA eliminates the QBAI-based NDTIR exclusion and renames GILTI as Net CFC Tested Income (“NCTI”). The permanent Section 250 deduction is reduced to 40 percent, producing a 12.6 percent effective U.S. tax rate.
FTCs are increased to 90 percent, meaning a foreign effective tax rate of roughly 14 percent is generally required to fully offset residual U.S. tax. These changes apply to tax years of foreign corporations beginning after December 31, 2025.
Practical Considerations
U.S. shareholders of CFCs should evaluate how these computational changes affect 2026 and later tax years.
Removing the tangible asset exclusion may reduce incentives to locate assets offshore and could materially increase NCTI for asset-heavy CFCs. Multinationals may wish to consider repatriating assets or restructuring operations.
The permanent deduction rate provides greater certainty for long-term planning, though the slightly higher effective tax rate may increase exposure in low-tax jurisdictions.
FDII Refined and Renamed Foreign-Derived Deduction Eligible Income (“FDDEI”)
Prior Rules
FDII provided a 37.5 percent deduction on qualifying foreign-derived income, resulting in a 13.125 percent effective tax rate. The computation included a deemed tangible income return based on QBAI.
New OBBBA Rules
OBBBA removes the DTIR and ratio components, simplifying the calculation and renaming FDII as Foreign-Derived Deduction Eligible Income (“FDDEI”).
The deduction becomes permanent at 33.34 percent, yielding a 14 percent effective rate. Interest and research and development expenses generally will no longer be allocated in computing FDDEI. These changes take effect for tax years beginning after December 31, 2025.
Practical Considerations
U.S. corporations should reassess how the new rules affect their Section 250 benefits beginning in 2026.
Companies with significant tangible assets or allocable interest and R&D expenses may benefit most from the streamlined computation. The changes also reinforce incentives for U.S.-based exports and services to foreign customers, making operational review and eligibility analysis critical.
Reinstatement of Section 958(b)(4) and New Section 951B
Prior Rules
Before TCJA, Section 958(b)(4) prevented downward attribution of ownership from foreign persons to U.S. persons, limiting CFC classification. TCJA repealed that rule, dramatically expanding CFC status and creating unintended compliance burdens.
New OBBBA Rules
OBBBA reinstates Section 958(b)(4), curbing downward attribution and reducing the number of foreign corporations treated as CFCs.
New Section 951B introduces targeted rules for foreign-controlled foreign corporations (“FCFCs”), applying Subpart F and NCTI inclusions in certain situations where foreign persons effectively control U.S. shareholders. These provisions apply to tax years of foreign corporations beginning after December 31, 2025.
Practical Considerations
This change is generally taxpayer-favorable. Taxpayers should revisit ownership structures to determine whether CFC status or U.S. shareholder classifications are eliminated, potentially reducing Subpart F and NCTI inclusions.
Compliance obligations may also decrease, including potential elimination of certain Form 5471 filings.
However, structures should be carefully reviewed for exposure under the new Section 951B rules, and restructuring opportunities may exist.
U.S. Shareholder Pro Rata Share Rule Changes
Prior Rules
Historically, U.S. shareholders included Subpart F or GILTI income only if they owned stock on the last day of the CFC’s tax year.
New OBBBA Rules
OBBBA expands the inclusion requirement to cover any period during the year in which a foreign corporation is a CFC and the U.S. shareholder holds stock, regardless of year-end ownership. These rules apply for tax years beginning after December 31, 2025.
Practical Considerations
The change closes planning gaps that allowed shareholders to avoid inclusions through year-end dispositions, creating a fairer allocation of income.
At the same time, it increases complexity for mid-year ownership changes, mergers, and acquisitions. Taxpayers will need enhanced tracking systems and careful transaction planning.
Next Steps Post-OBBBA
OBBBA’s international tax reforms simplify certain areas while introducing new layers of complexity in others. Careful analysis is essential to manage risk and identify planning opportunities.
SingerLewak’s International Tax team is prepared to help you evaluate how these changes affect your organization and to develop tailored strategies going forward.
Contact our team:
Robin Park | [email protected]
Stephen Bolt | [email protected]
Daniel Sheinfeld | [email protected]