From GILTI to NCTI: How the "One Big Beautiful Bill" Transforms International Taxation for U.S. Corporations

The Global Intangible Low-Taxed Income (GILTI) regime, introduced under the Tax Cuts and Jobs Act (TCJA) in 2017, served as a key pillar of U.S. international tax policy. It’s primary aim was to tax excess income earned by Controlled Foreign Corporations (CFCs) that exceeded a normal return on tangible assets. Though complex, the GILTI offered planning opportunities through the 10% Qualified Business Asset Investment (QBAI) exclusion and deductions for net tested interest expense. In practice, if a CFC held significant tangible assets, the shareholder could exclude a meaningful portion of foreign income from U.S. taxation.

Enter the One Big Beautiful Bill (OBBB), which radically transforms this landscape. Under the OBBB, GILTI is replaced with Net CFC Tested Income (NCTI), and with that rebranding comes a new approach: simpler in form, but harsher in substance.

Key International Tax Changes under the One Big Beautiful Bill

1. Elimination of QBAI and Interest Offsets

The OBBB eliminates two important planning levers:

• The 10% QBAI exclusion is eliminated entirely
• No deduction is allowed for net interest expense

U.S. shareholders must now include their full share of net tested income from CFCs, regardless of  how much capital investment or debt the CFCs have. This change effectively impacts capital-intensive or debt-financed CFCs, removing key levers that taxpayers previously used to mitigate U.S. tax exposure.

2. Adjustments to Section 250 Deduction and Foreign Tax Credits

While the base for inclusion is now broader, the OBBB does offer some relief:

• Section 250 deduction is now set permanent at 40%
• Foreign Tax Credit (FTC) haircut is eased from 20% to 10%, improving FTC utilization. If a CFC pays at least 14% in creditable foreign taxes, no residual U.S. tax is due.

International Tax Strategies for NCTI

The shift from GILTI to NCTI signals a move away from incentivizing foreign tangible investment and toward a more comprehensive taxation of global earnings. Key planning implications include:

• Reevaluating CFC structures in low-tax jurisdictions
• Maximizing FTCs through operations in jurisdictions that impose tax rates at or above 14%
• Reconsidering intercompany financing, as interest deductions no longer impact the U.S. inclusion.

Preparing for NCTI

While the OBBB simplifies the calculation, it also broadens the tax base and raises the effective burden. U.S. corporations should revisit their structures and strategies now, before the first MCTI inclusion hits the return. In this new environment, foreign tax alignment and FTC planning take center stage. Our Global Business team can help you navigate the NCTI transition, optimize FTC utilization, and mitigate your global tax exposure.