The international updates in the One Big Beautiful Bill Act are far less consequential than the Tax Cuts and Jobs Act in 2017 with the onset of the Section 965 Transition Tax and Global Intangible Low-Taxed Income (GILTI) regime.

The most exciting news with OBBBA is that proposed Section 899—the so-called revenge tax—did not make it into the final act. Proposed Section 899 was meant as a retaliation against foreign countries for assessing what the U.S. considered to be unfair taxes, including the Pillar Two Corporate Minimum Tax and Digital Services Tax, on U.S.-based large multinational corporations.

Proposed Section 899 would have had a broader reach, subjecting foreign investors and business owners of any size to U.S. tax rates up to 50 percent over time, simply for being from one of the countries that impose an unfair tax. With OBBBA, what we do see is fine tuning of certain provisions with a focus on GILTI, including how it is calculated, related deductions and rates, foreign tax credits, and definitional rules for CFCs including downward attribution.

GILTI was originally enacted as a formula: GILTI=Net CFC Tested Income (NTCI) less Deemed Tangible Income Return (DTIR). In the recent update, DTIR has been eliminated from the calculation, effectively removing the carve out for the return that was deemed to be attributable to depreciable business assets.

Without DTIR, GILTI=NCTI and GILTI as a formula is irrelevant. The deemed income reportable under Section 951A will simply be calculated as NCTI (Net CFC Tested Income). That said, many of us will likely still refer to Section 951A income as GILTI even though the formula has changed.

Next, we have two changes to the Section 250 deduction: the deduction has been made permanent, and the deduction rates have decreased.

The previous FDII deduction of 37.5 percent is now 33.34 percent and the previous GILTI deduction of 50 percent is now 40 percent. The net effect of these changes for taxation of GILTI is that there has been a slight increase from 10.5 percent to 12.6 percent. This is determined by the 21 percent corporate tax rate less a 50 percent GILTI deduction, compared to the 21 percent corporate tax rate less a 40 percent GILTI deduction.

There have also been some definitional changes to FDII related to the removal of DTIR from the GILTI calculation, as well as exceptions for certain types of income received after June 16, 2025.

As part of the IRC Section 250 deduction, only directly related expenses may be claimed and there is no longer an allowance for allocable deductions. FDII is also now FDDEI (Foreign Derived Deduction Eligible Income).

With respect to the GILTI foreign tax credit, a corresponding change has been made so that deductions will no longer be allocable to GILTI. Instead, only directly related expenses will reduce GILTI income and allocable deductions will instead be applied to U.S. source income. The next change to GILTI foreign tax credits is that the 20 percent haircut on GILTI foreign tax credit will be changed to 10 percent.

Downward attribution rules have had a much-needed change for the better.

The OBBBA has reinstated Section 958(b)(4) for tax years beginning after Dec. 31, 2025. This means that fewer entities will be considered CFCs and many of the minority U.S. shareholders who previously had GILTI inclusions under TCJA no longer do under the new rules.

Reinstating Section 958(b)(4) unfortunately doesn’t mean that downward attribution is gone entirely. Instead, it has been recodified under Section 951B with new definitions and acronyms: Foreign Controlled U.S. Shareholder (FCUS) and Foreign Controlled Foreign Corporation (FCFC).

In this limited scope, certain ownership structures will cause downward attribution treatment as U.S. shareholders and CFCs when there is ownership greater than 50 percent.

Other miscellaneous CFC updates include a modification of the pro rata rules.

Subpart F income and GILTI will apply to U.S. shareholders with ownership on any day during the tax year rather than only those with ownership on the last day of the year the corporation was a CFC. However, Section 956 is still only applicable for ownership on the last day as a CFC.

The look-through rules for tiered CFCs have been made permanent and the tax year for Specified Foreign Corporations will no longer have a one-month deferral – the majority US shareholder tax year must be used beginning after Nov. 30, 2025.

Lastly, the tax rate for BEAT has been permanently increased from 10 percent to 12.5 percent and an excise tax of 1 percent has been enacted for certain remittances of cash and equivalents (money orders, cashier’s checks, etc.) sent abroad.

The 1 percent excise tax does not apply to any electronic funds transfer, credit or debit transaction. Overall, the international tax changes in OBBBA are a minor revision compared to the sweeping changes TCJA, but it is worth reviewing how the updates impact your clients’ tax structures and planning.

Many of the changes are in effect for tax years beginning after Dec. 31, 2025.