International Taxation.
The One Big Beautiful Bill Act brings significant changes to the landscape for foreign corporations operating in the United States and international investors considering U.S. opportunities. With new provisions targeting cross-border activities—ranging from permanent extensions of international tax reforms to expanded compliance requirements—the Act introduces both expanded opportunities and fresh challenges. Understanding the core impacts is key for multinational enterprises and foreign investors aiming to navigate or capitalize on the new environment.
TL;DR for Foreign Corporations
The Act makes the international tax landscape more predictable by permanently extending key provisions such as bonus depreciation, updated CFC look-through rules, and modified anti-abuse measures like BEAT. These changes deliver greater certainty for global tax planning, support long-term investment, and streamline inter-company transactions.
However, foreign corporations also face new burdens, including broader anti-deferral rules and restricted access to some U.S. tax credits, leading to potentially higher effective U.S. tax costs and increased reporting requirements. The stability aids multinational firms focused on real business operations, but those relying on tax minimization or hybrid structures may experience less favorable outcomes.
TL;DR for Foreign Investors
For foreign investors, the Act’s permanent tax reforms create a more stable and competitive environment for putting capital to work in the U.S., especially with the continuation of favorable depreciation and business incentives. This long-term certainty can drive larger, more strategic investments and make the U.S. market more appealing relative to global peers.
However, new measures—such as the 1% excise tax on remittance transfers—create direct costs for cross-border capital movement, notably impacting individuals and families sending funds abroad. While the Act encourages sustained investment, investors must now weigh higher compliance and operating costs against the benefits of greater predictability and economic opportunity.
GILTI Regime Modifications (§70321-70323)
-
The Act renames Global Intangible Low-Tax Income (GILTI) as "net CFC tested income" and permanently sets the effective tax rate at 12.6% through a 40% §250 deduction.
-
GILTI was taxed at 10.5% through 2025, scheduled to increase to 13.125% thereafter. The regime included a deemed return on qualified business asset investment.
-
Permanent, effective for tax years beginning after December 31, 2025.
-
The Act eliminates the qualified business asset investment (QBAI) calculation, increases the foreign tax credit to 90% of foreign taxes paid, and limits expense allocations to directly allocable items.
-
These changes simplify the GILTI regime while maintaining its anti-base erosion function. The elimination of QBAI reduces complexity and may increase the income subject to the regime, while the higher foreign tax credit provides relief from double taxation. The effective rate of 12.6% remains competitive internationally.
FDII Regime Modifications (§70321-70323)
-
The Act renames Foreign-Derived Intangible Income (FDII) as "foreign-derived deduction eligible income" and permanently sets the effective tax rate at 14% through a 33.34% §250 deduction.
-
FDII was taxed at 13.125% through 2025, scheduled to increase to 16.4% thereafter, with a reduction for deemed return on tangible assets
-
Permanent, effective for tax years beginning after December 31, 2025.
-
The Act eliminates the QBAI reduction from the FDII calculation and clarifies that interest and Research & Experiment (R&E) expenses are not allocated to FDII income.
-
These changes make the FDII regime more generous by eliminating the tangible asset reduction and clarifying expense allocation rules. The 14% effective rate provides a meaningful incentive for domestic corporations to serve foreign markets from the United States rather than through foreign subsidiaries.
Base Erosion and Anti-Abuse Tax (§70331)
-
The Act permanently extends the BEAT with modifications, including changes to the minimum tax rate and base erosion percentage calculations.
-
The BEAT was scheduled to expire after 2025, with uncertainty about its future application.
-
Permanent, effective for tax years beginning after December 31, 2025.
-
The Act maintains the BEAT's basic structure while adjusting certain technical provisions to coordinate with other international tax changes.
-
The permanent extension of the BEAT provides certainty for multinational corporations while maintaining protections against base erosion. The technical modifications ensure the regime continues to function effectively alongside other international tax reforms.
Controlled Foreign Corporation Look-Through Rule (§70351)
-
The Act permanently extends the CFC look-through rule that allows CFCs to make payments to related CFCs without creating subpart F income.
-
The look-through rule was temporary and subject to periodic extensions.
-
Permanent, effective for tax years beginning after December 31, 2025.
-
The rule applies to payments between related CFCs, preventing the creation of subpart F income for transactions within the same controlled group.
-
This provision provides certainty for multinational corporations operating through multiple foreign subsidiaries. The permanent extension eliminates the need for periodic legislative action and allows for more efficient international structures.