Tax Law Invites States to Pursue Bigger Share of Foreign Profits

President Donald Trump’s tax and spending law opens the door for states to follow the federal government’s lead and tax a larger portion of international corporate income, vexing some business groups that argue states will exceed their taxing authorities on business income earned abroad.

The groups are particularly concerned about state adoption of a provision of the new tax law that restructures the global intangible low-taxed income regime, GILTI, created under the president’s 2017 tax reforms. GILTI was created to discourage multinationals from shifting intangible income, such as earnings from patents and licensing fees, to low-tax jurisdictions.

The law, signed ...