Article

One Big Beautiful Bill Act: Key international tax provisions

Initial analysis of the House-approved bill

June 5, 2025 · Authored by Jessica L. Jeane, James C. Lawson, Benjamin M. Willis, Nikki Grams

Outlined below is an initial analysis and important takeaways of key international tax provisions within the House-approved bill. It’s important to note that this is not final legislation; all tax provisions are subject to change in the Senate. The upper chamber begins its consideration of the measure the week of June 2 and is expected to significantly modify the House-approved bill.

Permanently increase post-2025 GILTI deduction to 49.2% (from 37.5%)

The global intangible low-taxed income (GILTI) deduction is proposed to be increased to 49.2% on a permanent basis for taxable years beginning after Dec. 31, 2025, and would remove the currently enacted scheduled change that would permanently reduce the deduction to 37.5% for taxable years beginning after Dec. 31, 2025.

Consider: The GILTI effective tax rate would increase from 10.5% to 10.67% as a result, which is still more taxpayer favorable than the 13.125% effective tax rate that would result if the GILTI deduction percentage changes to 37.5% as scheduled.

Consider: The temporary reversion of the adjusted gross income (AGI) limitation to an earnings before interest, taxes, depreciation and amortization (EBITDA) basis with respect to section 163(j) [and, separately, a broader exemption for certain small businesses from application of section 163(j) as results from a proposed increase in the gross receipts test of section 448(c) from a $25 million to $80 million aggregate threshold available to certain manufacturers] could decrease overall GILTI tax liability due to increased interest deductibility at the controlled foreign corporate (CFC) level.

Consider: The requirement to capitalize and amortize foreign research expenditures over a 15-year period remains. Taxpayers should continue to evaluate contract research activities performed by CFCs to determine if expenditures are currently deductible or subject to capitalization at the CFC level for purposes of calculating GILTI.

Permanently increase post-2025 FDII deduction to 36.5% (from 21.875%)

The FDII deduction rate is proposed to be increased to 36.5% on a permanent basis for taxable years beginning after Dec. 31, 2025. This change removes the scheduled change that would permanently reduce the deduction to 21.875% for taxable years beginning after Dec. 31, 2025.

Consider: The effective tax rate on post-2025 qualifying export activities would decrease to 13.335% from the scheduled 16.406% effective tax rate.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.