Sponsors (136)
Official title: To amend the Internal Revenue Code of 1986 to provide for current year inclusion of net CFC tested income, and for other purposes.
Introduced February 5, 2025 by Lloyd Alton Doggett · Last progress February 5, 2025
The bill tightens and clarifies international tax rules to raise revenue and curb profit‑shifting and inversions, but does so at the cost of higher tax bills for many multinationals, greater compliance burdens, and legal/regulatory uncertainty that could ripple to investment, territories, and some types of businesses.
U.S. taxpayers and multinationals get clearer, country-by-country rules and required Treasury guidance for computing taxable inclusions and foreign tax credits, reducing ambiguity and disputes in international tax reporting.
Repealing the reduced-rate FDII/section 250 treatment and tightening residence rules broadens the corporate tax base and reduces incentives for profit‑shifting, likely increasing U.S. corporate tax revenue and tax fairness.
New limits on interest deductions for domestic members of multinational groups (EBITDA-based test) reduce opportunities for base erosion via shifted interest expense while allowing a five‑year carryforward of disallowed interest, giving some phased relief.
Many multinational firms and foreign entities with U.S. management will face higher U.S. tax liabilities as FDII benefits are repealed and management-and-control/residency rules pull more entities into U.S. taxation.
The bill substantially increases compliance complexity and administrative costs—country‑by‑country computations, separate records for CFC taxable units, EBITDA reconciliations, and documenting 'management and control'—raising burdens for corporate taxpayers and their advisors.
Taxpayers lose flexibility to use and aggregate foreign tax credits (including elimination of certain carrybacks and exclusions), increasing the risk of higher cash taxes and potential double taxation in some years.
Based on analysis of 6 sections of legislative text.
Overhauls U.S. international tax rules: replaces GILTI with country-by-country inclusion, applies foreign tax credits by country, limits international interest deductions, tightens inversion and U.S.-management tests.
Rewrites major parts of the U.S. international tax rules to reduce incentives for moving profits and management offshore. It replaces the GILTI regime with a country-by-country “net CFC tested income” framework, requires foreign tax credit limits to be applied by country/taxable unit, narrows interest deductibility for large international groups, tightens inversion rules, and treats certain foreign corporations managed primarily in the U.S. as domestic for income tax purposes. Effective dates vary by provision (some changes apply to tax years beginning after 2024, one provision is retroactive to 2017, and the management-based domestic treatment applies two years after enactment).