One Big Beautiful Bill Act Aligns U.S. International Tax Rate with Global Norms

The One Big Beautiful Bill Act (OBBBA) represents one of the most significant shifts in U.S. international tax policy since the 2017 Tax Cuts and Jobs Act (TCJA). By transitioning from the Global Intangible Low-Taxed Income (GILTI) regime to the Net CFC Tested Income (NCTI) system, Congress not only simplified the rules—but also brought the U.S. statutory rate on international income closer to global standards under Pillar Two.

In this episode, we unpack what that alignment means, how it affects U.S. multinational corporations, and why the OBBBA’s rate reforms may signal the end of America’s “outlier” position in global tax policy.

🧩 Key Topics Covered

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• From GILTI to NCTI: How the OBBBA modernizes the U.S. approach to foreign income.
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• The 15% Benchmark: Why Pillar Two pushed countries toward a global minimum rate.
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• Rate Adjustment: U.S. NCTI effective rate now between 12.6% and 14%—nearly matching global norms.
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• Foreign Tax Credit Increase: Raised from 80% to 90%, reducing double taxation risk.
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• End of Indirect Expense Allocation: Eliminating a key distortion that previously inflated U.S. tax on foreign income.
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💡 Key Takeaways

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• Global Alignment: The U.S. now mirrors international standards rather than competing below them.
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• Simplified Compliance: Removing indirect expense allocation streamlines corporate tax planning.
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• Reduced Double Taxation: The higher FTC percentage better reflects taxes already paid abroad.
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• Corporate Relief with Balance: Though rates rose slightly, complexity and unpredictability fell.
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• Policy Symbolism: The U.S. can now credibly argue it complies with OECD Pillar Two principles.
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🧠 Why It Matters

The OBBBA’s tax realignment is both technical and symbolic—a recognition that global coordination is now central to corporate taxation. It gives U.S. companies more predictable outcomes in cross-border operations, while removing some of the odd mismatches that once made GILTI both complicated and controversial.

For advisors and international tax professionals, understanding this shift is critical. It affects foreign tax credit modeling, global structuring, and future treaty negotiations.