The One Big Beautiful Bill Act (OBBB) introduces major reforms to U.S. international tax policy. Key changes affect foreign tax credits, the GILTI and FDII regimes, sourcing and attribution rules, remittance taxation and compliance reporting, therefore transforming the framework for multinational corporations, exporters and globally connected taxpayers.
What Are the Key International Tax Provisions?
The following is a strategic executive summary of the international tax provisions within the OBBB.
- Foreign Tax Credit (FTC) Changes
- Deemed-paid credit for foreign taxes under IRC Section 960 increases from 80 percent to 90 percent.
- A new 10 percent reduction applies to foreign taxes associated with previously taxed earnings and profits (PTEP) distributions made after June 28, 2025, reducing FTC eligibility.
- Limits the foreign-source income classification to 50 percent for U.S.-manufactured goods sold through foreign branches.
- GILTI becomes NCTI
- GILTI is renamed to Net CFC Tested Income (NCTI).
- Section 250 deduction permanently reduced to 40 percent, effective after 2025.
- QBAI deduction was eliminated. Estimated U.S. tax rate rises to approximately 14 percent.
- FDII Becomes FDDEI
- FDII is renamed to Foreign-Derived Deduction Eligible Income (FDDEI).
- Section 250 deduction set at 33⅓ percent after 2025.
- The new FDDEI regime narrows eligibility by excluding certain intangible income and tightening deduction thresholds
- Attribution and Sourcing Rule Updates
- The long-awaited IRC Section 958(b)(4) was reinstated to prevent downward attribution.
- The reinstatement of IRC §958(b)(4) reverses prior downward attribution rules, aligning with pre-Tax Cuts and Jobs Act (TCJA) standards.
- Caps foreign-source income for U.S. exporters using foreign branches to 50 percent
- Remittance Transfer Tax
- Introduces a one percent excise tax on cash transfers abroad after Dec. 31, 2025.
- Exemptions for transfers through regulated financial institutions or U.S. card systems.
- This provision may disproportionately affect immigrant communities and small businesses with cross-border ties.
- New Reporting: Section 951B Regime
- Establishes new reporting requirements for Foreign Controlled U.S. Shareholders and new definitions.
- Section 951B introduces new compliance obligations for U.S. shareholders of foreign-controlled domestic corporations, including expanded disclosure and potential Section 962 election complexities.
- Repealed Foreign Corporate Retaliation Tax
- The originally proposed 20 percent ‘revenge tax’ on discriminatory foreign taxes was removed after the G7 agreement.
What Impacts Taxpayers the Most?
- U.S. Multinational Corporations: Higher effective tax rates on foreign earnings and limited FTC use.
- Export-Oriented Businesses: Reduced benefits from FDDEI and sourcing rule limitations. May face reduced competitiveness due to stricter sourcing rules and diminished FDDEI benefits.
- Expats and Foreign-Controlled U.S. Shareholders: New obligations via Section 951B and complex Section 962 election path. Increased compliance complexity under Section 951B may require professional tax advisory services.
- Immigrant Communities: One percent remittance tax adds compliance and financial costs.
One Big Beautiful Bill Act – International Tax Impacts
This article is intended for informational purposes only and reflects the author’s independent analysis of publicly available legislative text and commentary. It does not constitute legal or tax advice. All interpretations are original and not derived from proprietary third-party publications. Please contact your local Windham Brannon advisor or Brandi M. Samuel for more information and tax planning opportunities.
