Understanding the International Tax Provisions in the Latest Tax Bill: Extensions for GILTI, FDII, and BEAT

On May 7, 2025, Senator Thom Tillis (R-N.C.) introduced the “International Competition for American Jobs Act,” aimed at extending key provisions of the 2017 Tax Cuts and Jobs Act (TCJA), which will otherwise expire at the end of 2025. This bill focuses on three significant components: Global Intangible Low-Taxed Income (GILTI), Foreign-Derived Intangible Income (FDII), and the Base Erosion and Anti-Abuse Tax (BEAT). These provisions are important for U.S. multinational corporations and have substantial implications for the U.S. tax system.

GILTI was introduced under the TCJA to curb the deferral of earnings and profit shifting by U.S. multinational corporations to low-tax jurisdictions. The current effective tax rate for U.S. corporations on GILTI is 10.5%, achieved through a 50% deduction. However, if the current law expires at the end of 2025, the 50% deduction will be reduced to 37%, resulting in the effective tax rate on GILTI for U.S. corporations increasing to 13.125%. The latest bill proposes to extend the current GILTI provisions, maintaining the current rules and effective tax rate of 10.5%. In addition, the bill would eliminate the 80% foreign tax credit limitation on GILTI and would provide for carrying over GILTI net tested losses.

The FDII regime incentivizes U.S. corporations to keep their intangible assets, such as patents and trademarks, within the United States by providing a deduction on eligible sales derived from the sale of goods, including the licensing of intangibles, and services to foreign customers. The current effective tax rate on FDII is 13.125%, achieved through a 37.5% deduction. If the current law expires at the end of 2025, the rate will rise to 16.406% starting in 2026. The new bill seeks to extend the FDII provisions, preserving the favorable tax treatment for income from foreign sales.

The BEAT targets large corporations that reduce their U.S. tax liability through deductible payments to foreign affiliates by imposing a minimum tax on these base erosion payments, ensuring that companies cannot excessively lower their U.S. taxable income. The current BEAT tax rate is 10%. If the current law expires, the rate will increase to 12.5% in 2026. The proposed bill aims to extend the BEAT provisions, maintaining the current tax rates and thresholds.

The bill would also eliminate the rules for downward attribution in Section 958(b) from foreign persons to U.S. entities for determining controlled foreign corporation status.

As the U.S. tax landscape continues to evolve, we will continue to closely monitor the progress of this bill through legislative processes and assess its potential impacts on businesses and the economy.

Author: Calvin Yung | [email protected]