One Big Beautiful Bill Act (OBBBA) - No More Uncontrolled Downward Attribution?

When the Tax Cuts and Jobs Act (TCJA) repealed section 958(b)(4) back in 2017, it unleashed chaos across the cross-border tax landscape. The repeal allowed downward attribution from foreign to U.S. persons — causing hundreds of unintended Controlled Foreign Corporation (CFC) classifications and widespread compliance headaches.

Now, with the One Big Beautiful Bill Act (OBBBA) of 2025, section 958(b)(4) is finally restored — and a new section 951B introduced — providing a more surgical fix for the original “de-control” problem Congress had aimed to solve.

This episode explores what’s changed, what’s been fixed, and what tax professionals need to prepare for before the 2026 effective date.

🧩 Key Topics Covered

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• The 2017 Repeal Fallout: How TCJA’s removal of §958(b)(4) unintentionally turned non-U.S. structures into CFCs.
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• Why OBBBA Restored the Rule: The logic behind bringing §958(b)(4) back.
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• New §951B Explained: The “foreign controlled U.S. shareholder” (FCUSS) and “foreign controlled foreign corporation” (FCFC) framework.
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• Effective Dates & Transition: What happens on January 1, 2026 — and how to prepare.
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• Practical Implications: Impacts on portfolio interest exemption, Subpart F, and GILTI/NCTI exposure.
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💡 Key Takeaways

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• Downward Attribution Is Contained: §958(b)(4) reinstatement restores pre-TCJA logic.
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• Targeted Fix, Not Overkill: New §951B isolates true abuse cases without collateral CFCs.
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• Clarity for Inbound Investors: U.S. minority shareholders in foreign groups regain normal tax treatment.
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• Compliance Relief: Simplified ownership testing for multinational structures.
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• Effective 2026: Tax teams should reassess CFC mappings and update entity classification models now.
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🧠 Why It Matters

This correction marks a rare moment of bipartisan agreement in U.S. international tax — fixing one of the most disruptive technical issues from the TCJA. For cross-border tax advisors, multinational CFOs, and legal teams, the restoration of §958(b)(4) means greater certainty, stability, and alignment with long-standing ownership attribution principles.