G7 Endorses Side-by-Side Pillar Two Approach: Implications for CPAs

On June 28, 2025, the G7 issued a statement endorsing a side-by-side approach to the Organization for Economic Co-operation and Development’s (OECD) Pillar Two global minimum tax framework. This agreement formally recognizes that the United States already imposes a robust minimum tax through its own rules, notably Global Intangible Low-Taxed Income (GILTI) and, more recently, Net CFC Tested Income (NCTI) under the “One Big Beautiful Bill.”

This represents a diplomatic breakthrough that builds on earlier developments, such as the removal of the Section 899 “revenge tax” (see our blog by Jason Rauhe, CPA: U.S. Congress Backs Off Section 899 Retaliatory Tax After G7 Deal). With this latest G7 announcement, the path toward renewed international cooperation on global tax rules is more straightforward.

This development is particularly significant for U.S.-parented multinationals, which have long faced the risk of double taxation if foreign countries applied the Income Inclusion Rule (IIR) or the Undertaxed Profits Rule (UTPR) on top of existing U.S. minimum taxes. The G7 proposal would exempt U.S. groups from those foreign top-up mechanisms, so long as they are subject to a U.S. regime deemed equivalent.

Key Features of the G7 Pillar Two Statement

The G7 agreement outlines three important principles:

1. Side-by-Side System: U.S. multinationals subject to GILTI/NCTI are largely shielded from additional foreign top‑up taxes under IIR or UTPR. This avoids double taxation, simplifying compliance and reducing tax burdens.
2. Treatment of Tax Credit: The G7 favors treating non-refundable credits similarly to refundable ones, an important issue for U.S. companies that rely heavily on R&D credits, foreign tax credits, and renewable energy incentives.
3. Digital Tax Dialogue: The G7 emphasized that Pillar Two is only one part of the global tax puzzle, reaffirming the need for continued progress on digital taxation issues.

Guidance for CPAs & Advisors

Client Relief from Double Taxation: The side-by-side system delivers a de facto exemption from foreign minimum top-up tax exposures. This clarity allows CPAs to guide clients with greater confidence and avoid unnecessary double taxation concerns.

Simplified Forecasting & Modeling: With reduced exposure to foreign UTPR adjustments, CPAs can streamline modeling for effective tax rate forecasts, earnings guidance, and cash tax projections.

Maintain Vigilance on Implementation: Though affirming, the G7 agreement awaits full endorsement via the OECD/G20 Inclusive Framework. CPAs should keep clients informed of developments, flag potential compliance risks, and adjust strategies as new guidance is released.

Future Implications of the G7 Model

The G7’s embrace of the side-by-side model signals a shift from confrontation toward cooperation in the minimum tax arena, affirming the role of U.S. rules in the global tax architecture. That said, this framework is not yet finalized.

For U.S. multinational taxpayers, the G7’s side-by-side model offers a welcome path to tax certainty. But as with all policy reforms, the journey isn’t over; deliberate monitoring and proactive planning remain essential.

If your clients operate internationally, now is the time to revisit their global tax strategy. Contact our Global Business Services team to discuss how these developments may impact your client’s effective tax rate, reporting obligations, and long-term planning.