The Tax Times

Thursday, July 17, 2025

What the One Big Beautiful Bill Act Means for GILTI and US Corporate Taxpayers

Major changes are here for US multinational companies, thanks to the One Big Beautiful Bill Act. The law has overhauled how foreign corporate income is taxed, most notably by rewriting the old GILTI (Global Intangible Low-Taxed Income) regime. Here’s what you need to know.

What Happened to GILTI?

The Act makes sweeping changes:

· GILTI is now called Net CFC Tested Income (NCTI). The old name focused narrowly on intangible income; the new framework casts a wider net, making more foreign profits taxable in the US.

· The 10% Tangible Asset Exclusion (QBAI) is gone. Previously, a company could exclude a 10% return on its tangible foreign assets from GILTI, shielding some profits. That carve-out is eliminated. All of a controlled foreign corporation’s net income now counts for NCTI.

How Did the Effective Tax Rate Change?

Here’s a comparison of the GILTI/NCTI regime before and after the Act:

	Old Law (2025)	Act (2026+)
Tangible Asset Exclusion (QBAI)	10% exclusion	Eliminated
Deduction (% of GILTI/NCTI)	37.5%	40%
Foreign Tax Credit (FTC) Haircut	20%	10%
Effective US Tax Rate	13.125%	12.6%

Key details:

· The Section 250 deduction is set at 40% for NCTI (was going down to 37.5%). This means less of the income is deducted, raising the taxable amount but not as much as was previously scheduled.

· US companies can now credit 90% of foreign taxes paid (a 10% haircut), instead of 80%. This lowers the risk of double-taxation.

· For most structures, if a CFC pays at least a 14% effective foreign rate, there should be no extra US tax at the NCTI level.

What’s the Practical Impact?

· More Overseas Profits Are Taxed in the US. With no more QBAI exclusion, any US parent with substantial tangible assets abroad (factories, equipment) now sees significantly more of its foreign profits counted in US taxable income.

· Slightly Higher US Tax Burden, Offset by Better Credits. While more income is exposed, some relief comes from the better FTC allowance and a deduction set higher than previously scheduled.

· Major Strategic Reassessment Needed. Previous planning strategies, especially relying on tangible property overseas to shield profits, are now much less effective. Tax departments must model the new rules’ impact for any subsidiaries in lower-tax jurisdictions.

What Should US Multinationals Do Next?

· Review global structures and the effective foreign rates of all subsidiaries.

· Update tax forecasts, especially for CFCs with low foreign effective tax rates.

· Prepare for a potentially larger US tax bill on previously shielded income streams.

· Consider new structures and planning opportunities to minimize overall group tax.

While the Act has closed off certain planning techniques, it also attaches more certainty and clarity to the US international tax regime. Companies should prioritize analyzing these rule changes well before the new rules take effect, ensuring they remain compliant and tax-efficient in the new environment.

Have an IRS Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP contact us at:

www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888) 882-9243

Sources:

1. https://www.mayerbrown.com/en/insights/publications/2025/07/one-big-beautiful-bill-act-introduces-significant-domestic-and-international-tax-changes

2. https://www.stinson.com/newsroom-publications-one-big-beautiful-bill-explained

3. https://www.bilzin.com/insights/publications/2025/07/international-tax-changes-in-obba

4. https://www.dechert.com/knowledge/onpoint/2025/7/tax-reform-2025--the-one-big-beautiful-bill-act-signed-into-law.html

https://www.kirkland.com/publications/kirkland-alert/2025/07/final-one-big-beautiful-bill-act

Wednesday, July 16, 2025

Tax Court Denies Equitable Tolling To Firm That The Supreme Court Allowed Equitable Tolling

The case of Boechler P.C. v. Commissioner of Internal Revenue (docket 18578-17L, U.S. Tax Court) is a landmark in tax procedure, clarifying whether taxpayers who miss strict IRS deadlines can ever get a second chance. The story involves a small North Dakota law firm, a missed deadline by just one day, and a unanimous Supreme Court decision that reshaped how courts view filing deadlines in tax disputes.

The Dispute: Penalties, Levies, and a Late Petition

Boechler P.C. ran into trouble when the IRS identified a discrepancy in its tax filings—specifically, a failure to timely file certain information returns for 2012. The IRS assessed an “intentional disregard” penalty and, when Boechler did not respond, moved to levy the firm’s property to collect the debt. Boechler exercised its right to a Collection Due Process (CDP) hearing, but after the IRS upheld the levy, the firm had 30 days to petition the U.S. Tax Court for review. The deadline fell on a Sunday, so it rolled to Monday, August 28, 2017. Boechler’s petition, however, was postmarked August 29—one day late.

The Tax Court dismissed the petition for lack of jurisdiction, agreeing with the IRS that the 30-day deadline was absolute and jurisdictional. The Eighth Circuit Court of Appeals affirmed, leaving Boechler with no recourse—until the Supreme Court stepped in.

The Supreme Court’s Unanimous Decision

In April 2022, the Supreme Court ruled 9-0 that the 30-day deadline under Internal Revenue Code § 6330(d)(1) is not jurisdictional. Writing for the Court, Justice Barrett explained that only Congress can make a deadline jurisdictional by saying so “clearly,” and the statute here did not do that. Instead, the deadline is a procedural rule—a “claim-processing” requirement—that can, in rare cases, be extended under the doctrine of equitable tolling.

This was a significant shift. Before Boechler, the Tax Court treated all its deadlines as jurisdictional, meaning late filings were automatically barred. Now, if a taxpayer can show they pursued their rights diligently and faced extraordinary circumstances beyond their control, a court may excuse a late petition.

Back to the Tax Court: The Equitable Tolling Test

The Supreme Court sent the case back to the Tax Court to decide whether Boechler qualified for equitable tolling. At a trial in June 2025, the sole witness was Ms. Boechler, who testified that she miscalculated the deadline due to her many responsibilities. The firm argued that this should count as an “extraordinary circumstance.”

But the Tax Court applied a strict two-part test:

· Diligence: Did the taxpayer actively pursue their rights?

· Extraordinary Circumstances: Were there truly unusual events that prevented timely filing, despite the taxpayer’s diligence?

The court found Boechler failed both prongs. There was no evidence the firm followed up with its attorney or staff to ensure timely filing, nor any documentation of efforts to meet the deadline. Ms. Boechler could not recall who actually filed the petition or whether she gave specific instructions to do so. The court emphasized that being busy or making a mistake—while understandable—does not meet the high bar for equitable tolling. The petition remained untimely, and the IRS prevailed.

Why This Matters for Taxpayers and Practitioners

The Boechler decision is a double-edged sword for taxpayers. On one hand, it opens the door to relief for those who miss deadlines due to truly extraordinary circumstances, such as IRS misconduct or events entirely outside their control. On the other hand, the standards for equitable tolling remain exceptionally high. Courts will not excuse ordinary oversight, miscalculation, or even a heavy workload.

For tax professionals, the case is a reminder to document every step taken to meet deadlines and to advise clients that, while the law now allows for some flexibility, courts will scrutinize claims of diligence and extraordinary circumstances very closely.

The Bigger Picture

Boechler is part of a broader trend in which the Supreme Court has pushed back against treating procedural rules as jurisdictional unless Congress clearly says so. The decision likely applies to many other tax deadlines, not just CDP petitions. It reinforces the principle that, in most cases, missed deadlines are not automatically fatal—but relief is far from guaranteed.

Key Takeaways

· The 30-day deadline to petition the Tax Court after a CDP determination is not jurisdictional and can, in rare cases, be equitably tolled.

· To qualify for equitable tolling, a taxpayer must show both diligence in pursuing their rights and extraordinary circumstances beyond their control.

· Mere miscalculation or a busy schedule is not enough—the bar for equitable tolling remains very high.

· Tax professionals should document all efforts to meet deadlines and understand that courts will critically examine claims for equitable relief.

Boechler P.C. v. Commissioner is now a foundational case for understanding when tax deadlines are truly set in stone and when, just maybe, there’s room for a second chance.

Have an IRS Tax Problem?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP contact us at:

www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888) 882-9243

Sources:

1. https://supreme.justia.com/cases/federal/us/596/20-1472/

2. https://en.wikipedia.org/wiki/Boechler_v._Commissioner

3. https://www.law.cornell.edu/supct/cert/20-1472

4. https://www.naag.org/attorney-general-journal/supreme-court-report-boechler-v-commissioner-of-internal-revenue-service-20-1472/

Tuesday, July 15, 2025

Retroactive Tax Law for Tips and Overtime: What You Need to Know—and Do—Right Now

A major new federal tax law just took effect, and it’s a game-changer for millions of workers who earn tips and overtime pay. The “No Tax on Tips and Overtime” provision, part of the sweeping One Big Beautiful Bill (OBBBA), was signed into law on July 4, 2025, but here’s the catch: it applies retroactively to all of 2025. That means changes are already in effect, and both employees and employers need to act quickly to adapt.

What the Law Does

Starting January 1, 2025, eligible workers can deduct up to $25,000 in qualified tips and up to $12,500 in qualified overtime wages (or $25,000 for joint filers) from their federal taxable income. This is a direct reduction in the amount of income subject to federal income tax—not payroll taxes like Social Security and Medicare, which remain unchanged.

The deduction phases out for individuals earning more than $150,000 ($300,000 for joint filers), with the benefit shrinking by $100 for every $1,000 above those thresholds.

Important Definitions:

· Qualified Tips: These must be voluntary (not mandatory service charges) and earned in jobs where tipping is customary, like restaurants, bars, and salons. Certain professions—think doctors, lawyers, consultants, and financial advisors—are excluded.

· Qualified Overtime: Only the portion of overtime pay required by federal law (the Fair Labor Standards Act) counts toward the deduction.

· Timeframe: The law is in effect through December 31, 2028, unless extended.

What Employers Must Do Now

If you’re an employer with tipped or overtime-eligible workers, immediate action is required:

· Keep Withholding as Usual: Until the IRS issues new guidance and tax tables, continue standard payroll withholding for federal income tax.

· Track Everything: Start documenting all qualified tips and overtime wages paid since January 1, 2025. This will be essential for accurate reporting and to help employees claim their deductions.

· Prepare for New Forms: Be ready to issue updated wage statements as soon as the IRS releases instructions. Employers will need to report qualifying tips and overtime separately on Forms W-2 and 1099.

· Communicate Clearly: Let your employees know about the law, but explain that changes to their take-home pay might not happen right away. They’ll likely see the biggest impact when they file their 2025 tax returns, possibly receiving a refund.

What Employees Should Do

If you earn tips or overtime, here’s how to make sure you benefit:

· Keep Detailed Records: Save pay stubs, tip logs, and any documentation of overtime hours worked since the start of the year.

· Understand the Impact: When you file your 2025 taxes, you may owe less or get a bigger refund thanks to these new deductions.

· Check Eligibility: Make sure your job and income qualify under the new rules. If you’re unsure, ask your employer or a tax professional.

· Expect More Paperwork: Be prepared for new forms and possibly more complex tax filings.

Challenges to Watch For

While the law offers real tax relief, it’s not without complications:

· Payroll Systems Need Updates: Employers will need to work with payroll providers to ensure systems can track and report the new categories of income.

· State Taxes Vary: Some states may follow the federal lead, but others won’t. Employers and employees in multiple states should stay informed about local rules.

· Preventing Abuse: The Treasury is expected to issue rules to stop people from reclassifying regular income as “tips” or “overtime” just to claim the deduction.

Bottom Line: Act Now

This law is a big deal, but it’s also complex and retroactive. Don’t wait for the IRS to catch up—start tracking, communicating, and preparing today. Both employers and employees should consider consulting payroll experts or tax professionals to navigate the transition smoothly.

The potential savings are significant, but so are the compliance requirements. Stay proactive, keep good records, and watch for updates from the IRS and your payroll provider. The sooner you act, the smoother—and more profitable—2025 will be.

Have an IRS Tax Problem?