US tax bill remains in House of Representatives, further debate to continue week of May 19
International Tax Alert | Business Tax Alert
Draft tax bill released by House Ways and Means Committee
On May 12, 2025, an extensive 389 page draft tax bill was released by the House Ways and Means Committee for review by the full committee, and approved after several Democratic party amendments were voted down. The bill now has moved to the Budget Committee within the House, where debate and mark-up continues.
Deloitte has released a summary of the provisions contained in the Committee draft, which is available here: MORE
The following are notable items pertaining to “foreign” owned or foreign based companies and foreign individuals with US presence:
- Enforcement of remedies against “discriminatory and extraterritorial taxes” (i.e. DSTs, QDMTTs), i.e. “Section 899”
- Same increasing rates as previously communicated - annual 5% increments up to 20% plus the statutory rate applied
- Treaty rates are respected in this draft, but will still increase in annual 5% increments to 20% plus the applicable treaty rate.
- Section 899 applies to US paid interest, dividends, royalties, US ECI, branch profits tax, FIRPTA.
- In addition, greater than 50% foreign-owned US entities’ operations would be subject to BEAT (Base Erosion Anti-Abuse Tax) at 12.5%, even if they have not met the other thresholds currently in place. The US companies would be without benefits of full tax loss carryforward deductions, certain tax credits, and exceptions such as utilizing the services cost method (SCM) would not be allowed.
- The BEAT rate of 12.5% would then be further subject to the 20% increase in rates, as above, leading to potentially a 32.5% income tax rate after 5 years
- The tax increases on foreign persons (other than withholding taxes) would apply as of the first day of the first calendar year beginning on or after the latest of three dates:
- 90 days after the enactment of the proposed Section 899,
- 180 days after the enactment of an unfair foreign tax, or
- The first date than an unfair foreign tax begins to apply
- The increase on withholding taxes is limited until the Treasury Department publishes a list of countries imposing an unfair foreign tax.
- Interest expense deduction limitation (“Section 163(j) limitation”) – back to 30% of EBITDA of a US company (currently 30% of EBIT)
- “Bonus” depreciation is no longer phased out, and would be back to allowing in the year of purchase a 100% deduction of cost of most fixed assets of a US company.
- Research & Development expense deduction treatment. The bill rolls back to allowing a full expense for US qualified R&D expenditures (currently must capitalize all US R&D and amortize over 5 year period). No change to foreign R&D expenses incurred – still must capitalize and amortize over 15 years
- Tax Cuts & Jobs Act of 2017: extending current rates/rules for GILTI, FDII & BEAT (currently set to increase rates in 2026).
Stay Tuned
We will keep you informed of further changes and / or details that are released. The bill must still be passed by the full House, which has a tight margin of majority for the Republican party, and is still being debated amongst committees. Once passed, it will then be sent to the US Senate for further approval before going to the President for passage to law.
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