On July 4, 2025, President Trump signed the bill known as H.R. 1 into law. This bill contains many tax provisions that will impact the American taxpayer. In this alert, our BRC Tax Professionals, will provide an overview of the most relevant international tax provisions contained in the bill and the impact they may have on you and your business.
Amends IRC §904 to change the allocation and apportionment of certain deductions to foreign source net CFC tested income for purposes of the foreign tax credit limitation. Specifically, interest expense and R&D expenses are no longer allocated to foreign source net CFC tested income, which can increase the allowable foreign tax credit for U.S. multinationals.
Effective Date: Taxable years beginning after December 31, 2025
Increases the percentage of foreign taxes deemed paid that can be claimed as a credit under IRC §960(d) from 80% to 90% for CFC tested income, and makes a corresponding increase to the gross-up under IRC §78.
Effective Date: Taxable years beginning after December 31, 2025
Allows up to 50% of income from the sale or exchange of inventory produced in the U.S. and sold through a foreign branch to be treated as foreign-sourced, rather than U.S.-sourced, for purposes of the foreign tax credit.
Effective Date: Taxable years beginning after December 31, 2025
Reduces the IRC §250 deduction for foreign-derived intangible income (FDII) from 37.5% to 33.34% and for global intangible low-taxed income (GILTI, now renamed “net CFC tested income”) from 50% to 40%. This increases the effective U.S. tax rate on these types of income.
Effective Date: Taxable years beginning after December 31, 2025
Renames GILTI (global intangible low-taxed income) as “net CFC tested income” and repeals the deemed return on foreign investments, simplifying the calculation and aligning with international minimum tax standards.
Effective Date: Taxable years beginning after December 31, 2025
Raises the BEAT (Base Erosion and Anti-Abuse Tax) rate under IRC §59A from 10% to 10.5% for most taxpayers, and makes related technical and conforming changes.
Effective Date: Taxable years beginning after December 31, 2025
Makes permanent the look-through rule for related controlled foreign corporations under IRC §954(c)(6), which was previously temporary and set to expire.
Effective Date: Taxable years of foreign corporations beginning after December 31, 2025
Eliminates the ability of specified foreign corporations to elect a taxable year ending one month later than the U.S. parent, aligning the tax year of foreign subsidiaries with their U.S. parents.
Effective Date: Taxable years of specified foreign corporations beginning after November 30, 2025
Restores the pre-2017 limitation on downward attribution of stock ownership under IRC §958(b), so U.S. persons are not treated as owning stock held by foreign persons for purposes of determining CFC status.
Effective Date: Taxable years of foreign corporations beginning after December 31, 2025
Aligns the pro rata share rules for Subpart F income with those for net CFC tested income, so inclusions are based on periods of ownership during the year, not just year-end ownership.
Effective Date: Taxable years of foreign corporations beginning after December 31, 2025
The provision imposes a federal excise tax on remittance transfers sent from the United States to foreign countries.
The tax is set at 1 percent of the amount of each remittance transfer.
The tax is imposed on the sender of the remittance, but the remittance transfer provider (such as a money transmitter, bank, or other financial institution) is responsible for collecting the tax from the sender and remitting it to the IRS on a quarterly basis.
The tax applies only to remittance transfers for which the sender provides cash, a money order, a cashier’s check, or any other similar physical instrument to the remittance transfer provider.
Transfers funded by withdrawals from accounts at financial institutions subject to the Bank Secrecy Act, or funded with a U.S.-issued debit or credit card, are exempt from the tax.
The terms “remittance transfer,” “remittance transfer provider,” and “sender” are defined by cross-reference to the Electronic Fund Transfer Act (15 U.S.C. § 1693o-1(g)), which generally covers electronic transfers of funds requested by a consumer in the U.S. to a recipient in a foreign country.
U.S. citizens and nationals are generally exempt from the tax if they use a qualified remittance transfer provider that verifies their status. If a U.S. citizen or national does pay the tax, they may claim a refundable tax credit, provided they supply a Social Security number.
Remittance transfer providers are required to file information returns with the IRS detailing the aggregate number and value of remittance transfers, regardless of whether they were made by U.S. or foreign persons.
The provision includes secondary liability for remittance transfer providers if the tax is not collected at the time of transfer.
There is no minimum value threshold for the tax; it applies to all covered remittance transfers regardless of amount. The stated policy rationale is to curb illegal immigration and the flow of funds to foreign countries, but the provision is broad and applies to all non-U.S. persons sending remittances abroad.
Note: The provisions discussed within this alert are federal tax provisions. The various state taxing authorities may or may not conform to these newly enacted federal provisions.
If you have any questions about how this impacts you or your business, please don’t hesitate to reach out to your trusted BRC tax advisor.
To read other alerts associated with the passing of this bill, click here.