Committee Reveals Extensions and International Changes for TCJA Tax Reforms
Headline: House Ways and Means Committee Proposes Tax Reform Bill to Extend TCJA and International Tax Provisions
The House Ways and Means Committee has shared a partial text for a tax reform bill that aims to extend key elements of the 2017 Tax Cuts and Jobs Act (TCJA), ensuring competitive tax policies for American businesses operating internationally.
One of the notable changes proposed in the bill is the repeal of the 20% Foreign Tax Credit (FTC) "haircut" for GILTI taxes, which currently allows only 80% of the foreign taxes paid on foreign income characterized as GILTI to be claimed as a credit against US taxes. If the bill passes, this repeal would allow 100% of the foreign taxes paid on GILTI to be credited against US taxes.
The bill also seeks to make permanent the 37.5% deduction for Foreign-Derived Intangible Income (FDII), encouraging US companies to export goods and services at a rate of 13.125% instead of 21%.
However, the implications of these changes on the Controlled Foreign Corporation (CFC) Look-Through Rule, Foreign-Derived Intangible Income (FDII), Global Intangible Low-Taxed Income (GILTI), Base Erosion and Anti-Abuse Tax (BEAT), Foreign Tax Credit (FTC) Limitation Baskets, Downward Attribution, or the FTC "Haircut" remain uncertain.
The final reconciliation bill so far has focused on extensions of domestic tax credits (such as LIHTC, NMTC) and broad tax policy goals, with no mention of international tax rules like GILTI or FDII. Discussions about potential subsequent tax legislation or bipartisan bills to address outstanding issues, including possibly international tax provisions, are ongoing, but no firm commitments exist.
The bill would maintain the Base Erosion and Anti-Abuse Tax (BEAT) tax rate, which imposes a tax on taxpayers with more than $500 million in gross receipts, at 10% indefinitely if the bill passes.
The GILTI provisions, which effectively tax profits of foreign subsidiaries at a minimum rate of 10.5%, would also be made permanent. However, the Controlled Foreign Corporation (CFC) Look-Through Rule, which allows active income to maintain its active character and not be recast as passive dividend, is not proposed to be renewed beyond Dec. 31, 2025.
Various changes are proposed to the Foreign Tax Credit (FTC) Limitation Baskets to ensure foreign taxes paid on one type of income do not offset US taxes on another type of income.
The tax reform bill is part of a broader effort to extend key elements of the TCJA and ensure competitive tax policies for American businesses operating internationally. Republican lawmakers hope the full tax reform bill can advance through the House by Memorial Day.
For the most accurate and updated understanding, ongoing monitoring of committee releases, legislative text, and expert analyses will be necessary as the reconciliation process advances.
- The proposed tax reform bill, aimed at extending key elements of the TCJA, includes changes in investing strategies for businesses, such as the potential repeal of the 20% Foreign Tax Credit "haircut" for GILTI taxes, which could impact the finance sector by allowing 100% of the foreign taxes paid on GILTI to be credited against US taxes.
- The bill also addresses politics and general-news, with ongoing discussions about potential subsequent tax legislation or bipartisan bills to address outstanding issues, including possibly international tax provisions, indicating a continued focus on business and finance in the realm of governmental policy-making.
