The One Big Beautiful Bill Act (OBBBA) is reshaping the international tax landscape, introducing changes that fine-tune but don’t completely overhaul the rules set by the Tax Cuts and Jobs Act (TCJA). From adjustments to the GILTI regime and foreign tax credit calculations to updates on FDII and controlled foreign corporations, these provisions will affect how U.S. businesses with global operations report and manage their taxes.

To break down what these changes mean in practice, we spoke with Brad Lombardi, Senior Manager in our International Tax Services Group. With deep expertise advising multinationals on cross-border tax strategy and compliance, Brad shares his perspective on the most important updates, what companies need to pay attention to, and why even these refinements can carry meaningful implications for global businesses.

Q: Brad, what are the biggest changes in OBBBA for international taxes?

Brad: If you missed my blog, be sure to check it out here: The OBBBA Shifts International Tax Law. The important thing to understand is that OBBBA didn’t totally remake the international tax landscape the way the TCJA did. These are more tweaks around the edges.

The most noticeable change for clients is that the old GILTI regime has been renamed to Net CFC Tested Income (NCTI), but the underlying concept is still basically the same. Substantively, it’s similar, just with some adjustments.

For example, the Section 250 deduction on GILTI income was reduced from 50% to 40%. That means corporate taxpayers will see a slightly higher effective U.S. tax on that income. On the flip side, the foreign tax credit calculation was made a little more favorable: companies can now claim up to 90% of foreign taxes (up from 80%).

Another technical change is the elimination of the so-called “10% return on tangible assets.” Previously, companies could exclude that portion of income from GILTI calculations, but that’s now gone. The overall impact is modest, less than one percentage point in effective tax rate, but it’s still something business leaders will notice.

Q: Are there other technical shifts businesses should be aware of?

Brad: Yes. One area practitioners are watching closely is “downward attribution.” Under TCJA, ownership of foreign entities could sometimes be attributed in a way that triggered extra U.S. reporting requirements. OBBBA scaled that back, which should reduce unnecessary compliance headaches for some U.S. companies with foreign affiliates.

On the FDII side (now called FDDI), there were similar changes. Again, the concept remains, but they eliminated the 10% tangible asset return there too, and they restricted which expenses, like R&D, can be allocated against this deduction.

Another technical update: the so-called CFC “look-through” rule has now been made permanent. That’s something that used to expire and had to be extended every few years. It matters less today than before GILTI, but it does add certainty.

And finally, the rules for when U.S. shareholders must pick up income from controlled foreign corporations (CFCs) have changed. Now, if you’re a shareholder at any point during the year, you may have to pick up a pro-rata share of income, not just if you’re a shareholder on the last day of the tax year.

Q: From a practical perspective, are these changes reshaping business decisions or M&A activity?

Brad: Honestly, no. These are technical changes that matter for compliance and effective tax rates, but they’re not “game-changers” in terms of business strategy. I haven’t seen companies restructuring or changing deal activity because of them. It’s more about making sure we account for the new rules correctly on the tax return.

Q: A big part of OBBBA is encouraging companies to invest and innovate in the U.S. Do you see that having an impact on international operations?

Brad: Not in a big way, at least not yet. Many U.S. multinationals already try to keep their R&D and intellectual property onshore, since the U.S. credit system is relatively competitive. Nothing in OBBBA has triggered clients to restructure their global operations based on R&D.

Q: If you had to give companies one simple piece of advice to prepare for these changes, what would it be?

Brad: Stay in close contact with your tax advisor. Most of these changes are technical, and while they don’t require companies to rethink their entire global structure, they do need to be reflected correctly in tax filings.

If you’re a company that was heavily relying on that 10% tangible asset return, you could see a spike in GILTI exposure now that it’s gone. That’s something to keep an eye on. But overall, I don’t see these changes, though important, driving companies to “go back to the drawing board.”

Wondering what other tax strategies are being reshaped by OBBBA? This conversation with Brad is our third Inside OBBBA interview. Next up Joe Tamburo will share her perspective on how the new legislation affects opportunity zone investments. Stay tuned as we continue to break down the provisions that matter most to businesses and their leaders.

Don’t forget to check out our comprehensive summaries of OBBBA’s impact on individuals and businesses. Check out our other Inside OBBBA Interviews here:

Inside OBBBA: How 100% Bonus Depreciation is Reshaping Cost Segregation

Inside OBBBA: Restoring the Power of R&D Credits