Summary#
This bill changes many U.S. international tax rules for corporations and their owners. Key changes in the text include:
- Replace the current “global intangible low-taxed income” (GILTI) rule with a new current-year inclusion called "net CFC tested income." It requires U.S. shareholders to include amounts from controlled foreign corporations (CFCs) and applies that inclusion country by country.
- Remove the reduced tax rate that applied to certain foreign-derived and CFC income, and increase the portion of foreign taxes treated as deemed paid.
- Narrow some exclusions from tested income and treat some oil-related foreign income as Subpart F income.
- Eliminate the carryback of foreign tax credits; credits would generally only carry forward.
- Require the foreign tax credit limitation to be applied on a country-by-country basis using taxable units, and direct the Treasury to issue related rules.
- Limit interest deductions for domestic corporations that are part of large international financial reporting groups. The limit is tied to a group-based measure of net interest and uses EBITDA to allocate amounts. It also allows certain carryforwards of disallowed interest.
- Tighten rules on inverted corporations so more inverted or post-inversion entities can be treated as domestic for tax purposes. It updates tests for management, control, and domestic business activities.
- Treat certain foreign corporations that are primarily managed and controlled in the United States as domestic corporations for income tax if they meet size or trading tests.
- The bill sets different effective dates for parts of the law; many changes apply to taxable years beginning after December 31, 2024, while the rule for foreign corporations managed in the United States applies two years after enactment.
What it means for you#
- If you are a U.S. shareholder of foreign subsidiaries, the income you must include on your tax return may change in timing and in how it is calculated.
- If your company files consolidated international financial statements, its allowable interest deductions may be limited based on group measures and EBITDA allocation.
- Companies that moved their headquarters or are foreign but run from the United States could be treated as domestic taxpayers under these rules.
- The Treasury Department is given authority to write regulations to implement many of these changes.
Expenses#
No publicly available information on budgetary effects or costs is included in the bill text provided.
Proponents' View#
No publicly available information on proponents' arguments or statements is included in the bill text provided.
Opponents' View#
No publicly available information on opponents' arguments or statements is included in the bill text provided.