International Provisions of the One Big Beautiful Bill: What Global Businesses Should Know
Originally published on July 15, 2025
The One Big Beautiful Bill Act (OBBBA), signed into law over the July 4th weekend, marks the most significant overhaul of U.S. international tax rules since the 2017 Tax Cuts and Jobs Act. While the law is broad in scope, companies with foreign subsidiaries or cross-border operations will want to pay close attention to how the updated rules affect tax liabilities, cash flow and planning strategies.
Overall, the changes are meant to streamline compliance, reduce residual U.S. tax for many multinationals, and provide greater certainty for forward-looking planning and tax preparation. Here are the key updates and what they could mean for your business.
Out with GILTI, in with Net CFC Tested Income
OBBBA replaces the GILTI regime with a new framework called Net CFC Tested Income (NCTI). Under this model, all earnings from controlled foreign corporations (CFCs) are now included; there’s no more 10% “QBAI” carveout. However, the section 250 deduction continues (at a reduced 40% rate, down from 50%).
The gross inclusion on a U.S. return might go up with this development. However, richer foreign tax credits (described below) help soften the blow. For many taxpayers, the net result could be a lower worldwide effective tax rate.
Foreign tax credits: a meaningful upgrade
Previously, only 80% of foreign taxes paid by CFCs could be claimed via deemed-paid credits. OBBBA raises that to 90%, giving companies more relief from double taxation. Just as important, U.S. interest and R&D deductions are no longer automatically allocated to foreign income categories. This removes a major limitation that used to block the full use of credits.
This is a significant development. If your foreign subsidiaries are in high-tax jurisdictions, these changes could entirely eliminate U.S. residual tax on NCTI.
Look-through rule made permanent
One of the more taxpayer-friendly developments is the permanent extension of the section 954(c)(6) “look-through” rule. This allows dividends, interest, rents and royalties to move between related CFCs without triggering Subpart F income.
Until now, this provision had to be renewed periodically, which created uncertainty for long-term planning. With the rule now permanent, companies might want to revisit how they structure cash movements across their foreign group.
Additional international tax updates
| Provision | What Changed | What It Means |
|---|---|---|
| BEAT | The Base Erosion and Anti-Abuse Tax is now set at 10.5%, with coordination rules preserving the value of R&D and clean energy credits. | Fewer companies will get caught up in the complexities of BEAT provisions, and innovation incentives remain intact. |
| CFC One-Month Deferral | Repealed. Foreign subsidiaries must align their tax years with the U.S. parent. | Watch for stub-year returns in 2026 if your foreign entities are off-calendar. |
| Downward Attribution Rollback | The rollback of §958(b)(4) returns, but new §951B anti-abuse rules are layered in. | Fewer surprise CFCs for U.S. investors, but structures with indirect foreign control may need a closer look. |
So what’s the bottom line?
For most middle-market businesses with foreign subsidiaries, the OBBBA changes are net positive. The increased foreign tax credit percentage helps neutralize the effect of a broader NCTI base. Additionally, look-through relief and simplified BEAT calculations cut down on compliance headaches. However, businesses operating in low- or no-tax jurisdictions may see a bump in residual U.S. tax.
What should your company do next?
Here’s what we suggest.
- Run the numbers. Model your 2026 projections under the NCTI regime, using the updated 40% deduction and 90% FTC.
- Check fiscal year-ends. If any of your foreign entities use non-calendar years, prepare for a 2026 stub-period return.
- Update repatriation strategies. With permanent look-through treatment, intercompany flows could become much more efficient.
- Watch for guidance. Treasury regulations are expected to clarify several areas, especially around the new §951B rules targeting foreign-controlled structures.
At James Moore, we work with many businesses that are expanding into the U.S. or managing complex cross-border structures. Our international tax team is already modeling the impact of OBBBA for clients and helping them plan ahead with confidence.
Need help navigating the changes? Let’s talk about how this new law affects your business and how to make the most of it.
This summary is for informational purposes only and may be updated as further guidance is issued. Always consult your tax advisor before making changes to your global tax strategy.
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