The Tax Times: What the One Big Beautiful Bill Act Means for GILTI and US Corporate Taxpayers

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.

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