What U.S. Multinationals Need to Know

For companies with foreign operations or income, the One Big Beautiful Bill Act brings significant tax shifts. These changes affect how foreign earnings are taxed, how deductions are calculated, and how certain international structures are treated.

GILTI & FDII Adjustments

• GILTI (Global Intangible Low-Taxed Income): The effective tax rate on GILTI increases by reducing the Section 250 deduction from 50% to 37.5%.
  
  
• FDII (Foreign-Derived Intangible Income): The Section 250 deduction for FDII is also reduced from 37.5% to 21.875%.
  
  

These changes raise the effective U.S. tax rates on foreign profits, especially for IP-rich companies and those operating in low-tax jurisdictions.

BEAT Minimum Tax Increase

• The Base Erosion and Anti-Abuse Tax (BEAT) is increased to a 15% minimum rate (up from 10%).
  
  
• This primarily targets large corporations making deductible payments to related foreign entities.
  
  

BEAT expansion could result in increased tax liabilities for companies using intercompany cross-border payments as part of their structure.

Foreign Tax Credit & Sourcing Rules

OBBBA includes updates to:

• Allocation and apportionment of foreign taxes for credit purposes
  
  
• Sourcing rules for income earned from sales of goods, services, and intangibles
  
  

These changes may affect the ability to claim foreign tax credits, and could result in double taxation for poorly structured operations.

CFC Attribution and Anti-Avoidance

The bill tightens rules related to:

• Controlled Foreign Corporation (CFC) attribution, particularly where U.S. individuals own shares through foreign entities
  
  
• Hybrid arrangements and structures designed to avoid Subpart F or GILTI
  
  

New Excise Tax on Remittance Transfers

A new 1% excise tax is imposed on cross-border remittance transfers exceeding $10,000 annually. This applies to payments sent outside the U.S., including dividends, interest, royalties, and service fees.

Need Help Understanding These Changes?

International tax is already complex, and OBBBA adds new layers of calculation and compliance. Whether you're a CFO, controller, or international entrepreneur, our team at Reagan & Reagan CPA is here to guide you through the updates and help optimize your tax position.