US Tax Bill, “One Big Beautiful Bill Act”

A focus and reminder of important items pertaining to Non-US Groups with US Investments

As most of you are aware, the United States Congress approved and President Trump signed into law a new reconciliation bill (the “Act”) that has extended many expiring provisions from the Tax Cuts & Jobs Act (“TCJA”) of 2017, as well as provided for other tax updates for both individuals and businesses.  The new Act also has included other funding priorities, unrelated to taxation. 

Deloitte Tax News & Views has prepared a full summary of the tax effects, amongst other information, here:  Find Out More

Most Pertinent Developments

What follows are notable items pertaining to “foreign” owned or “foreign” based companies and non-US individuals with US presence.

OUT: IRC Section 899 or the “enforcement of remedies against ‘discriminatory and extraterritorial taxes’” 

• The Senate bill removed the Section 899 language, which could have increased the US tax bill for many non-US owned multinational groups.

• The removal came after the release of the G7 announcement on 26 June regarding an agreement reached whereby “OECD Pillar Two taxes will not apply to US companies”

The introduction of new IRC Section 951B: Foreign Controlled US Shareholders (“FCUSS”) and Foreign-Controlled Foreign Corporation (“FCFC”) inclusion rules

• FCUSS are subject to CFC income inclusion rules (Subpart F, NCTI inclusions (fka GILTI))

• This could be applicable to “foreign” owned US subsidiaries with partial ownership of other non-US subsidiaries of a “foreign” multinational group, even if the US entity’s shareholdings are less than 50%, or there is indirect US ownership.

• Applies for years beginning after December 31, 2025

• We recommend review of corporate structures for implications of this Section, as it may create unintended results, such as Subpart F and NCTI inclusions to US companies within “foreign” multinational groups. 

Base Erosion and Anti-Abuse Tax

• The BEAT rate is increased from 10% to 10.5%, which is less than the rate of 12.5% to have taken effect in 2026 under the TCJA

• The increased rate applies to years beginning after December 31, 2025.

• As stated above, Section 899 is out, as are the punitive rules that were pushing many “foreign” owned US companies into the BEAT regime.

• We recommend confirming the application of BEAT rules to US companies within groups. 

Business interest limitation modification (IRC Section 163(j)

• Allows again for utilization of EBITDA to calculate adjusted taxable income (“ATI”) as the base to apply the 30% limitation for annual interest expense deduction (TCJA law allowed for utilization of only EBIT as base).  This has been made permanent.

• This change is applicable for tax years beginning after December 31, 2024, i.e. effective for tax year 2025

• However, ATI now does not include NCTI (fka GILTI) or Subpart F, and related taxes paid gross-ups.  This change is effective for tax years beginning after December 31, 2025.

“Bonus” Depreciation

• Bonus depreciation is no longer phased out, and is back to allowing, in the year of purchase and placed in service, a 100% deduction of cost of most fixed assets of a US company.

• This applies to assets purchased and placed in service after January 19, 2025 and before January 1, 2030.

• This change provides opportunities for many taxpayers, especially for newly acquired assets and M&A deals.

Research & Development expense deduction treatment 

• The Act rolls back to allowing a full expense for US qualified R&D expenditures in the year incurred (currently must capitalize all US R&D and amortize over 5 year period).

• No change to “foreign” R&D expenditures – still must capitalize and amortize over 15 years.

• Transitional rules will apply to deduct previously capitalized costs.

• Capitalization and amortization of costs may now be elected into, in lieu of deduction.

Other US-International Provisions

• GILTI - QBAI no longer reduces CFC (or FCFC) net tested income.  As such, Global Intangible Low-Tax Income (GILTI) now has become known as Net CFC Tested Income or “NCTI”
  • The deduction allowed related to GILTI and related tax paid (Section 78 Gross-up) has been reduced from 50% to 40%.  Under the TCJA, that deduction was to be reduced to 37.5% in 2026.
  • The foreign tax credit haircut has been reduced from 20% to 10%, a benefit to taxpayers
  • This, coupled with tax credit changes, will generally result in an effective tax rate on NCTI to be between 12.6% and 14%.
• FDII – QBAI is also removed from foreign-derived income deduction, changing the calculation base to foreign-derived eligible income (“FDDEI”)
  • The deduction allowed, however, is 33.34% of FDDEI (from 37.5%)
• The changes to NCTI and FDDEI apply for years of foreign corporations beginning after December 31, 2025

Further noteworthy points

• Downward attribution is once again “turned off” under IRC Section 958(b)(4) – EXCEPT for FCUSS and FCFCs in IRC Section 951B (see above).

• The month deferral allowed for CFC tax years from its US shareholders is no longer allowed; all CFCs must follow US shareholder year ends.

• Look-through income sourcing under IRC Section 954(c)(6) has been made permanent

• Business meal expenses, currently 50% deductible, will now be disallowed completely

• Most Energy or Green credits have been discontinued

• Individual income tax rates have been permanently lowered to their current rates (were set to increase in 2026 under TCJA)

OECD Pillar Two Implications

• The above changes will update the current and deferred income tax expenses and account balances for US companies and CFCs or FCFCs for third quarter reporting.

• The above can be considered enacted and substantially enacted for USGAAP and IFRS purposes, respectively as of 4 July 2025.

• Even with the G7 agreement, the OECD guidance have not yet reflected this agreement, and local country laws also have not been updated to reflect any changes.

• The US tax law changes can have a real impact to potential Pillar 2 top-up tax and reporting now.  

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