Big Business Calls on Congress to Ward Off Global Tax Spike (1)

Multinationals want US lawmakers to extend low tax rates on foreign-earned income as they tackle competing priorities in putting together a mammoth tax bill next year.

If the bill doesn’t retain three provisions of the 2017 tax overhaul at their current rates, companies will owe more US tax on the income they’ve earned abroad.

Maintaining the three provisions, as well as the lower corporate tax rate also created in the overhaul, will be necessary “to enhance America’s competitiveness and support manufacturers’ efforts to create jobs and grow investment” in the US, Charles Crain, vice president of domestic policy at the National Association of Manufacturers, said Wednesday.

Besides the 21% corporate rate, the Republican-led 2017 law created three foreign-income provisions: the US minimum tax on foreign income, also known as GILTI; a tax on foreign income from repatriated intellectual property, known as FDII; and a so-called base erosion and profit shifting tax, or BEAT. Rates for all three are scheduled to increase in 2026.

On a related front, companies want the incoming Trump administration to negotiate with other countries at the OECD to allow the GILTI tax to be treated like one of the key rules in the 15% global minimum tax. The move would alleviate some administrative complexity for American companies to comply with the global minimum levy abroad.

By 2025, 90% of multinational companies with more than €750 million ($791 million) in revenue will be subject to the tax.

GOP View

The GILTI regime—for global intangible low-taxed income—sets a minimum rate of between 10.5% and 13.1% on the income of a multinational’s foreign subsidiaries. The rate is poised to increase in 2026 to between 13.1% and 16%.

Colleen O’Neill, EY national tax department leader, and Cathy Schultz, vice president of tax and fiscal policy at the Business Roundtable, said that maintaining a lower GILTI rate is a top international-tax priority for their clients.

Companies also want to retain the effective rate of 13.1% on FDII—foreign-derived intangible income, or foreign-derived income from intellectual property held in the US. The rate is expected to rise to about 16% in 2026.

The FDII provision is important because it “reduces taxes for companies that locate job-creating, export-producing intellectual property in the U.S,” the National Association of Manufacturers said.

Rep. Kevin Hern (R-Okla.), a member of the Ways and Means Committee, who has been a part of the committee’s global competitiveness tax team, said members are analyzing the 2017 tax law’s international provisions from “all angles.” He didn’t comment on whether the rates for GILTI, FDII, and BEAT would be retained.

Ways and Means member Rep. Ron Estes (R-Kan.), said that FDII and GILTI have been a boon to the US, bringing back intellectual property to American shores. Estes acknowledged companies’ desire to keep the current rates, but didn’t say if he would endorse that action.

“As we approach 2025, I am committed to building on the success of GILTI, FDII and BEAT to make the United States a more favorable place to do business,” he said.

Domestic Priorities

President-elect Donald Trump has also made several campaign promises, including a 15% tax rate for companies that manufacture domestically. Tax deductions for research and development, equipment, and maintaining the 21% corporate are also a top priority for companies.

So lawmakers may view international tax provisions as a way to pay for domestic tax priorities.

“I think with Trump’s campaign proposals, it’s much less likely that that rate on domestic income would go up,” O’Neill said. “I could see either the statutory effective rate on international income, or simply the effective rate on international income going up,” she added.

A spokesperson for the Trump transition team didn’t respond to a request for comment.

GILTI, Global Minimum Tax

Schultz said her members would also like to see the GILTI tax made into a permanent income inclusion rule to make compliance with the Organization for Economic Cooperation and Development’s global minimum tax easier for US multinational companies abroad.

The income inclusion rule is one of three key global minimum tax rules agreed to by countries’ delegates at the OECD to ensure that companies with revenue over €750 million pay a 15% minimum rate in every country where they operate. Under the rule, the country where a company is headquartered is allowed to collect tax from a company’s subsidiary when its local jurisdiction has taxed its income below 15%.

Schultz said that companies want to make GILTI a “permanent IIR” because a safe harbor under the global minimum tax rules that details the interaction between the minimum levy and the US regime is set to expire. The rule is applicable for fiscal years that begin on or before Dec. 31, 2025, and doesn’t include fiscal years ending June 30, 2027.

Under the safe harbor, the US GILTI rate is “pushed down” from the parent company to the subsidiaries operating in foreign countries with tax rates below 13.1%. In effect, the safe harbor decreases the amount of top-up tax a company pays.

The base erosion and anti-abuse tax, or BEAT, is set to increase from 10% to 12.5% in 2026. BEAT levies a 10% tax on US companies that reach specific annual gross receipts and interest deduction thresholds. It was included in the 2017 tax law to deter companies from shifting profits overseas through debt financing.

Jennifer Acuna, a principal at KPMG’s Washington National Tax Practice, said that businesses want the BEAT rate to remain at 10%. But she also said it’s important for companies to be able to use their US business credits to offset their BEAT tax bills—an ability that’s no longer allowed in 2026.

Acuna said companies “absolutely” want to retain the ability to use business credits this way.