The One, Big, Beautiful Bill Act (OBBB), which was signed into law on July 4, has changed U.S. taxation of multinational businesses. The most notable among these changes are various modifications that relate to the former global intangible low-taxed income (GILTI) regime enacted during the first Trump administration as part of the Tax Cuts and Jobs Act (TCJA). The changes to GILTI (covered in more depth below) include:
- A reduction in the percentage of tax deduction applied to this type of income.
- Changes in foreign tax credit rules intended to offset the impact of that reduced deduction, such as revised expense allocations and alterations to the creditable tax “haircut.”
Beyond the GILTI alterations, the OBBB introduced new rules related to inventory sourcing and non-GILTI aspects of the foreign tax credit, and it could affect certain attributes of deductibility for interest and research and experimentation expenses. For tax years starting after Dec. 31, 2025 (and certain tax provision components sooner), taxpayers can expect changes in how their foreign income is taxed, the mechanics of foreign tax credits, and the interplay with other changes in the OBBB.
