The One Big Beautiful Bill Act (OBBA) introduces several meaningful changes to U.S. international tax rules that will affect multinational businesses, foreign subsidiaries, and cross-border transactions. While much of the framework remains familiar, the updates adjust definitions, deductions, and inclusion rules in ways that could increase effective tax rates and compliance complexity.
Below is a practical overview of the most significant international tax changes under OBBA and what they mean for taxpayers.
GILTI is a U.S. tax regime that applies to foreign corporation profits when a U.S. person or corporation owns at least 10% of a controlled foreign corporation (CFC).
A CFC is generally defined as a foreign corporation that is more than 50% owned, in total, by U.S. shareholders, each holding at least a 10% ownership interest. Importantly, GILTI applies regardless of whether the foreign corporation actually distributes earnings to its U.S. owners.
Under existing rules, a U.S. corporation that owns shares in a CFC can deduct 50% of its GILTI inclusion through the IRC Section 250 deduction. This deduction was designed to help mitigate double taxation across jurisdictions and reduces the effective U.S. corporate tax rate on GILTI income from 21% to 10.5%.
OBBA renames GILTI as Net CFC Tested Income (NCTI) and reduces the Section 250 deduction from 50% to 40%. As a result, the effective corporate tax rate on this income increases from 10.5% to 12.6%.
FDII represents the portion of a U.S. corporation’s intangible income that is derived from selling, leasing, or licensing products, or providing services, to foreign customers.
The FDII regime serves as an incentive for U.S. exports and applies exclusively to U.S. C corporations. Under current law, corporations may deduct 37.5% of their FDII under IRC Section 250, reducing the effective tax rate on this income from 21% to 13.125%.
OBBA renames FDII as Foreign Derived Deduction Eligible Income (FDDEI) and reduces the Section 250 deduction from 37.5% to 33.34%. This change increases the effective corporate tax rate on FDDEI income to approximately 14%.
BEAT is a minimum tax designed to discourage large corporations from shifting profits outside the United States through deductible payments to foreign related parties. It applies to corporations with average annual gross receipts of at least $500 million over the prior three years and a base erosion percentage of 3% or more.
Under OBBA, the BEAT minimum tax rate increases from 10% to 10.5%, and this higher rate is made permanent beginning in 2026.
OBBA makes several notable adjustments to the CFC rules that could significantly expand income inclusion and compliance obligations.
Under prior law, stock owned by foreign persons could be “downwardly attributed” to U.S. persons, causing foreign corporations to be treated as CFCs even when U.S. owners did not actually control them. For example, a foreign parent’s ownership in a foreign subsidiary could be attributed to a U.S. subsidiary, resulting in unexpected CFC status.
OBBA limits the use of downward attribution when determining whether a U.S. person owns shares in a foreign corporation or whether that corporation qualifies as a CFC.
However, OBBA also introduces new Section 951B, which reinstates downward attribution in limited circumstances involving a foreign-controlled U.S. shareholder (FCUSS). In these cases, downward attribution applies solely for purposes of income inclusion rules such as Subpart F, Section 956, and GILTI.
This new provision is expected to affect a significant number of corporate taxpayers. Evaluating foreign-controlled group structures and gathering the information required to determine deemed income inclusions may be complex and will require careful analysis.
Previously, only U.S. shareholders who owned CFC stock on the last day of the CFC’s taxable year were required to include their share of GILTI and Subpart F income.
Under OBBA, any U.S. shareholder owning at least 10% of a CFC at any point during the taxable year must include their pro-rata share of GILTI and Subpart F income. This change does not apply to all CFC income categories, however. Inclusions related to investments in U.S. property will continue to apply only to shareholders who own stock on the last day of the CFC’s taxable year.
Subpart F income generally consists of passive foreign income earned by CFCs that must be included in a U.S. shareholder’s taxable income.
OBBA permanently extends the look-through rule for related CFCs. Under this rule, foreign personal holding company income, such as dividends, interest, rents, and royalties, received from a related CFC is excluded from Subpart F income if it is attributable to the active income of the related payor CFC and is neither Subpart F income nor effectively connected income (ECI).
By making this provision permanent, OBBA provides long-term certainty for taxpayers engaged in cross-border intercompany transactions.
OBBA introduces a new 1% remittance transfer tax on certain outbound money transfers from the United States to foreign recipients.
This tax applies only when a sender transfers funds using cash, money orders, cashier’s checks, or similar physical instruments. Transfers made through bank accounts, ACH or debit transactions, and credit cards are excluded from the tax.
The sender is responsible for paying the tax, while remittance service providers, including financial institutions, money transfer operators, fintech companies, and non-bank financial institutions, are responsible for collecting the tax at the time of the transaction. These providers must make semi-monthly deposits and file quarterly returns using Form 720.
OBBA increases effective tax rates and expands income inclusion rules, making international tax compliance more complex. Businesses with foreign operations should review their structures and modeling well ahead of 2026.
Our accounting team can help you understand the impact and identify planning opportunities. If you have any questions, contact us below and our team will be happy to help.