Category: OBBBA Text

(a) In general.—Section 958(b) is amended—

(1) by inserting after paragraph (3) the following:

“(4) Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person.”, and

(2) by striking “Paragraph (1)” in the last sentence and inserting “Paragraphs (1) and (4)”.

(b) Foreign controlled United States shareholders.—Subpart F of part III of subchapter N of chapter 1 is amended by inserting after section 951A the following new section:

“SEC. 951B. Amounts included in gross income of foreign controlled United States shareholders.

“(a) In general.—In the case of any foreign controlled United States shareholder of a foreign controlled foreign corporation—

“(1) this subpart (other than sections 951A, 951(b), and 957) shall be applied with respect to such shareholder (separately from, and in addition to, the application of this subpart without regard to this section)—

“(A) by substituting ‘foreign controlled United States shareholder’ for ‘United States shareholder’ each place it appears therein, and

“(B) by substituting ‘foreign controlled foreign corporation’ for ‘controlled foreign corporation’ each place it appears therein, and

“(2) section 951A (and such other provisions of this subpart as provided by the Secretary) shall be applied with respect to such shareholder—

“(A) by treating each reference to ‘United States shareholder’ in such section as including a reference to such shareholder, and

“(B) by treating each reference to ‘controlled foreign corporation’ in such section as including a reference to such foreign controlled foreign corporation.

“(b) Foreign controlled United States shareholder.—For purposes of this section, the term ‘foreign controlled United States shareholder’ means, with respect to any foreign corporation, any United States person which would be a United States shareholder with respect to such foreign corporation if—

“(1) section 951(b) were applied by substituting ‘more than 50 percent’ for ‘10 percent or more’, and

“(2) section 958(b) were applied without regard to paragraph (4) thereof.

“(c) Foreign controlled foreign corporation.—For purposes of this section, the term ‘foreign controlled foreign corporation’ means a foreign corporation, other than a controlled foreign corporation, which would be a controlled foreign corporation if section 957(a) were applied—

“(1) by substituting ‘foreign controlled United States shareholders’ for ‘United States shareholders’, and

“(2) by substituting ‘section 958(b) (other than paragraph (4) thereof)’ for ‘section 958(b)’.

“(d) Regulations.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance—

“(1) to treat a foreign controlled United States shareholder or a foreign controlled foreign corporation as a United States shareholder or as a controlled foreign corporation, respectively, for purposes of provisions of this title other than this subpart (including any reporting requirement), and

“(2) with respect to the treatment of foreign controlled foreign corporations that are passive foreign investment companies (as defined in section 1297).”.

(c) Clerical amendment.—The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by inserting after the item relating to section 951A the following new item:

“Sec. 951B. Amounts included in gross income of foreign controlled United States shareholders.”.

(d) Effective date.—The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2025.

(e) Special rule.—

(1) IN GENERAL.—Except to the extent provided by the Secretary of the Treasury (or the Secretary’s delegate), the effective date of any amendment to the Internal Revenue Code of 1986 shall be applied by treating references to United States shareholders as including references to foreign controlled United States shareholders, and by treating references to controlled foreign corporations as including references to foreign controlled foreign corporations.

(2) DEFINITIONS.—Any term used in paragraph (1) which is used in subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code of 1986 (as amended by this section) shall have the meaning given such term in such subpart.

(f) No inference.—The amendments made by this section shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to taxable years beginning before the taxable years to which such amendments apply.

(a) In general.—Section 898(c) is amended by striking paragraph (2) and redesignating paragraph (3) as paragraph (2).

(b) Effective date.—The amendments made by this section shall apply to taxable years of specified foreign corporations beginning after November 30, 2025.

(c) Transition rule.—

(1) IN GENERAL.—In the case of a corporation that is a specified foreign corporation as of November 30, 2025, such corporation’s first taxable year beginning after such date shall end at the same time as the first required year (within the meaning of section 898(c)(1) of the Internal Revenue Code of 1986) ending after such date. If any specified foreign corporation is required by the amendments made by this section to change its taxable year for its first taxable year beginning after November 30, 2025—

(A) such change shall be treated as initiated by such corporation,

(B) such change shall be treated as having been made with the consent of the Secretary, and

(C) the Secretary shall issue regulations or other guidance for allocating foreign taxes that are paid or accrued in such first taxable year and the succeeding taxable year among such taxable years in the manner the Secretary determines appropriate to carry out the purposes of this section.

(2) SECRETARY.—For purposes of this subsection, the term “Secretary” means the Secretary of the Treasury or the Secretary’s delegate.

(a) In general.—Section 954(c)(6)(C) is amended by striking “and before January 1, 2026,”.

(b) Effective date.—The amendment made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2025.

SEC. 70341. Coordination of business interest limitation with interest capitalization provisions.

(a) In general.—Section 163(j) is amended by redesignating paragraphs (10) and (11) as paragraphs (11) and (12) and by inserting after paragraph (9) the following:

“(10) COORDINATION WITH INTEREST CAPITALIZATION PROVISIONS.—

“(A) IN GENERAL.—In applying this subsection—

“(i) the limitation under paragraph (1) shall apply to business interest without regard to whether the taxpayer would otherwise deduct such business interest or capitalize such business interest under an interest capitalization provision, and

“(ii) any reference in this subsection to a deduction for business interest shall be treated as including a reference to the capitalization of business interest.

“(B) AMOUNT ALLOWED APPLIED FIRST TO CAPITALIZED INTEREST.—The amount allowed after taking into account the limitation described in paragraph (1)—

“(i) shall be applied first to the aggregate amount of business interest which would otherwise be capitalized, and

“(ii) the remainder (if any) shall be applied to the aggregate amount of business interest which would be deducted.

“(C) TREATMENT OF DISALLOWED INTEREST CARRIED FORWARD.—No portion of any business interest carried forward under paragraph (2) from any taxable year to any succeeding taxable year shall, for purposes of this title (including any interest capitalization provision which previously applied to such portion) be treated as interest to which an interest capitalization provision applies.

“(D) INTEREST CAPITALIZATION PROVISION.—For purposes of this section, the term ‘interest capitalization provision’ means any provision of this subtitle under which interest—

“(i) is required to be charged to capital account, or

“(ii) may be deducted or charged to capital account.”.

(b) Certain capitalized interest not treated as business interest.—Section 163(j)(5) is amended by adding at the end the following new sentence: “Such term shall not include any interest which is capitalized under section 263(g) or 263A(f).”.

(c) Regulatory authority.—Section 163(j), as amended by subsection (a), is amended by redesignating paragraphs (11) and (12) as paragraphs (12) and (13) and by inserting after paragraph (10) the following:

“(11) REGULATORY AUTHORITY.—The Secretary shall issue such regulations or guidance as may be necessary or appropriate to carry out the purposes of this subsection, including regulations or guidance to determine which business interest is taken into account under this subsection and section 59A(c)(3).”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

SEC. 70342. Definition of adjusted taxable income for business interest limitation.

(a) In general.—Subparagraph (A) of section 163(j)(8) is amended—

(1) by striking “and” at the end of clause (iv), and

(2) by adding at the end the following new clause:

“(vi) the amounts included in gross income under sections 951(a), 951A(a), and 78 (and the portion of the deductions allowed under sections 245A(a) (by reason of section 964(e)(4)) and 250(a)(1)(B) by reason of such inclusions), and”.

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

SEC. 70342. Definition of adjusted taxable income for business interest limitation.

(a) In general.—Subparagraph (A) of section 163(j)(8) is amended—

(1) by striking “and” at the end of clause (iv), and

(2) by adding at the end the following new clause:

“(vi) the amounts included in gross income under sections 951(a), 951A(a), and 78 (and the portion of the deductions allowed under sections 245A(a) (by reason of section 964(e)(4)) and 250(a)(1)(B) by reason of such inclusions), and”.

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

(a) In general.—Section 163(j) is amended by redesignating paragraphs (10) and (11) as paragraphs (11) and (12) and by inserting after paragraph (9) the following:

“(10) COORDINATION WITH INTEREST CAPITALIZATION PROVISIONS.—

“(A) IN GENERAL.—In applying this subsection—

“(i) the limitation under paragraph (1) shall apply to business interest without regard to whether the taxpayer would otherwise deduct such business interest or capitalize such business interest under an interest capitalization provision, and

“(ii) any reference in this subsection to a deduction for business interest shall be treated as including a reference to the capitalization of business interest.

“(B) AMOUNT ALLOWED APPLIED FIRST TO CAPITALIZED INTEREST.—The amount allowed after taking into account the limitation described in paragraph (1)—

“(i) shall be applied first to the aggregate amount of business interest which would otherwise be capitalized, and

“(ii) the remainder (if any) shall be applied to the aggregate amount of business interest which would be deducted.

“(C) TREATMENT OF DISALLOWED INTEREST CARRIED FORWARD.—No portion of any business interest carried forward under paragraph (2) from any taxable year to any succeeding taxable year shall, for purposes of this title (including any interest capitalization provision which previously applied to such portion) be treated as interest to which an interest capitalization provision applies.

“(D) INTEREST CAPITALIZATION PROVISION.—For purposes of this section, the term ‘interest capitalization provision’ means any provision of this subtitle under which interest—

“(i) is required to be charged to capital account, or

“(ii) may be deducted or charged to capital account.”.

(b) Certain capitalized interest not treated as business interest.—Section 163(j)(5) is amended by adding at the end the following new sentence: “Such term shall not include any interest which is capitalized under section 263(g) or 263A(f).”.

(c) Regulatory authority.—Section 163(j), as amended by subsection (a), is amended by redesignating paragraphs (11) and (12) as paragraphs (12) and (13) and by inserting after paragraph (10) the following:

“(11) REGULATORY AUTHORITY.—The Secretary shall issue such regulations or guidance as may be necessary or appropriate to carry out the purposes of this subsection, including regulations or guidance to determine which business interest is taken into account under this subsection and section 59A(c)(3).”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

(a) In general.—Section 59A(b) is amended—

(1) by striking “10 percent” in paragraph (1) and inserting “10.5 percent”, and

(2) by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

(b) Conforming amendments.—

(1) Section 59A(b)(1) is amended by striking “Except as provided in paragraphs (2) and (3)” and inserting “Except as provided in paragraph (2)”.

(2) Section 59A(b)(2), as redesignated by subsection (a)(2), is amended by striking “the percentage otherwise in effect under paragraphs (1)(A) and (2)(A) shall each be increased” and inserting “the percentages otherwise in effect under paragraph (1)(A) shall be increased”.

(3) Section 59A(e)(1)(C) is amended by striking “in the case of a taxpayer described in subsection (b)(3)(B)” and inserting “in the case of a taxpayer described in subsection (b)(2)(B)”.

(c) Other modifications.—

(1) Section 59A(b)(2)(B)(ii), as redesignated by subsection (a)(2), is amended by striking “registered securities dealer” and inserting “securities dealer registered”.

(2) Section 59A(h)(2)(B) is amended by striking “section 6038B(b)(2)” and inserting “section 6038A(b)(2)”.

(3) Section 59A(i)(2) is amended—

(A) by striking “subsection (g)” and inserting “subsection (h)”, and

(B) by striking “subsection (g)(3)” and inserting “subsection (h)(3)”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

SEC. 70331. Extension and modification of base erosion minimum tax amount.

(a) In general.—Section 59A(b) is amended—

(1) by striking “10 percent” in paragraph (1) and inserting “10.5 percent”, and

(2) by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

(b) Conforming amendments.—

(1) Section 59A(b)(1) is amended by striking “Except as provided in paragraphs (2) and (3)” and inserting “Except as provided in paragraph (2)”.

(2) Section 59A(b)(2), as redesignated by subsection (a)(2), is amended by striking “the percentage otherwise in effect under paragraphs (1)(A) and (2)(A) shall each be increased” and inserting “the percentages otherwise in effect under paragraph (1)(A) shall be increased”.

(3) Section 59A(e)(1)(C) is amended by striking “in the case of a taxpayer described in subsection (b)(3)(B)” and inserting “in the case of a taxpayer described in subsection (b)(2)(B)”.

(c) Other modifications.—

(1) Section 59A(b)(2)(B)(ii), as redesignated by subsection (a)(2), is amended by striking “registered securities dealer” and inserting “securities dealer registered”.

(2) Section 59A(h)(2)(B) is amended by striking “section 6038B(b)(2)” and inserting “section 6038A(b)(2)”.

(3) Section 59A(i)(2) is amended—

(A) by striking “subsection (g)” and inserting “subsection (h)”, and

(B) by striking “subsection (g)(3)” and inserting “subsection (h)(3)”.

(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

SEC. 70321. Modification of deduction for foreign-derived deduction eligible income and net CFC tested income.

(a) In general.—Section 250(a) is amended—

(1) by striking “37.5 percent” in paragraph (1)(A) and inserting “33.34 percent”,

(2) by striking “50 percent” in paragraph (1)(B) and inserting “40 percent”, and

(3) by striking paragraph (3).

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

SEC. 70322. Determination of deduction eligible income.

(a) Sales or other dispositions of certain property.—

(1) IN GENERAL.—Section 250(b)(3)(A)(i) is amended—

(A) by striking “and” at the end of subclause (V),

(B) by striking “over” at the end of subclause (VI) and inserting “and”, and

(C) by adding at the end the following new subclause:

“(VII) except as otherwise provided by the Secretary, any income and gain from the sale or other disposition (including pursuant to the deemed sale or other deemed disposition or a transaction subject to section 367(d)) of—

“(aa) intangible property (as defined in section 367(d)(4)), and

“(bb) any other property of a type that is subject to depreciation, amortization, or depletion by the seller, over”.

(2) CONFORMING AMENDMENT.—Section 250(b)(5)(E) is amended by inserting “(other than paragraph (3)(A)(i)(VII))” after “For purposes of this subsection”.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to sales or other dispositions (including pursuant to deemed sales or other deemed dispositions or a transaction subject to section 367(d) of the Internal Revenue Code of 1986) occurring after June 16, 2025.

(b) Expense apportionment limited to properly allocable expenses.—

(1) IN GENERAL.—Section 250(b)(3)(A)(ii) is amended to read as follows:

“(ii) expenses and deductions (including taxes), other than interest expense and research or experimental expenditures, properly allocable to such gross income.”.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to taxable years beginning after December 31, 2025.

SEC. 70323. Rules related to deemed intangible income.

(a) Taxation of net CFC tested income.—

(1) IN GENERAL.—Section 951A(a) is amended by striking “global intangible low-taxed income” and inserting “net CFC tested income”.

(2) REPEAL OF TAX-FREE DEEMED RETURN ON FOREIGN INVESTMENTS.—Section 951A, as amended by the preceding provisions of this Act, is amended by striking subsections (b) and (d) and by redesignating subsections (c), (e), and (f) as subsections (b), (c), and (d), respectively.

(3) CONFORMING AMENDMENTS.—

(A) (i) Section 250 is amended by striking “global intangible low-taxed income” each place it appears in subsections (a)(1)(B)(i), (a)(2), and (b)(3)(A)(i)(II) and inserting “net CFC tested income”.

(ii) The heading for section 250 of such Code is amended by striking “Global Intangible Low-Taxed Income” and inserting “Net CFC Tested Income”.

(iii) The item relating to section 250 in the table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking “global intangible low-taxed income” and inserting “net CFC tested income”.

(B) Section 951A(c)(1), as redesignated by paragraph (2), is amended by striking “subsections (b), (c)(1)(A), and (c)(1)(B)” and inserting “subsections (b)(1)(A) and (b)(1)(B)”.

(C) Section 951A(d), as redesignated by paragraph (2), is amended—

(i) by striking “global intangible low-taxed income” each place it appears and inserting “net CFC tested income”, and

(ii) by striking “subsection (c)(1)(A)” in paragraph (2)(B)(ii) and inserting “subsection (b)(1)(A)”.

(D) Section 960(d)(2) is amended—

(i) by striking “global intangible low-taxed income” in subparagraph (A) and inserting “net CFC tested income”, and

(ii) by striking “section 951A(c)(1)(A)” in subparagraph (B) and inserting “section 951A(b)(1)(A)”.

(E) (i) The heading for section 951A is amended by striking “Global Intangible Low-Taxed Income” and inserting “Net CFC Tested Income”.

(ii) The item relating to section 951A in the table of sections for subpart F of part III of subchapter N of chapter 1 is amended by striking “Global intangible low-taxed income” and inserting “Net CFC tested income”.

(b) Deduction for foreign-derived deduction eligible income.—

(1) IN GENERAL.—Section 250(a)(1)(A) is amended by striking “foreign-derived intangible income” and inserting “foreign-derived deduction eligible income”.

(2) CONFORMING AMENDMENTS.—

(A) Section 250(a)(2) is amended by striking “foreign-derived intangible income” each place it appears and inserting “foreign-derived deduction eligible income”.

(B) Section 250(b), as amended by subsection (a), is amended—

(i) by striking paragraphs (1) and (2),

(ii) by redesignating paragraphs (4) and (5) as paragraphs (1) and (2), respectively, and by moving such paragraphs before paragraph (3),

(iii) in paragraph (2)(B)(ii), as so redesignated, by striking “paragraph (4)(B)” and inserting “paragraph (1)(B)”, and

(iv) by striking “intangible” in the heading thereof and inserting “deduction eligible”.

(C) (i) The heading for section 250 is amended by striking “intangible” in the heading thereof and inserting “deduction eligible”.

(ii) The heading for section 172(d)(9) is amended by striking “intangible” and inserting “deduction eligible”.

(iii) The item relating to section 250 in the table of sections for part VIII of subchapter B of chapter 1 is amended by striking “intangible” and inserting “deduction eligible”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

(a) Taxation of net CFC tested income.—

(1) IN GENERAL.—Section 951A(a) is amended by striking “global intangible low-taxed income” and inserting “net CFC tested income”.

(2) REPEAL OF TAX-FREE DEEMED RETURN ON FOREIGN INVESTMENTS.—Section 951A, as amended by the preceding provisions of this Act, is amended by striking subsections (b) and (d) and by redesignating subsections (c), (e), and (f) as subsections (b), (c), and (d), respectively.

(3) CONFORMING AMENDMENTS.—

(A) (i) Section 250 is amended by striking “global intangible low-taxed income” each place it appears in subsections (a)(1)(B)(i), (a)(2), and (b)(3)(A)(i)(II) and inserting “net CFC tested income”.

(ii) The heading for section 250 of such Code is amended by striking “Global Intangible Low-Taxed Income” and inserting “Net CFC Tested Income”.

(iii) The item relating to section 250 in the table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking “global intangible low-taxed income” and inserting “net CFC tested income”.

(B) Section 951A(c)(1), as redesignated by paragraph (2), is amended by striking “subsections (b), (c)(1)(A), and (c)(1)(B)” and inserting “subsections (b)(1)(A) and (b)(1)(B)”.

(C) Section 951A(d), as redesignated by paragraph (2), is amended—

(i) by striking “global intangible low-taxed income” each place it appears and inserting “net CFC tested income”, and

(ii) by striking “subsection (c)(1)(A)” in paragraph (2)(B)(ii) and inserting “subsection (b)(1)(A)”.

(D) Section 960(d)(2) is amended—

(i) by striking “global intangible low-taxed income” in subparagraph (A) and inserting “net CFC tested income”, and

(ii) by striking “section 951A(c)(1)(A)” in subparagraph (B) and inserting “section 951A(b)(1)(A)”.

(E) (i) The heading for section 951A is amended by striking “Global Intangible Low-Taxed Income” and inserting “Net CFC Tested Income”.

(ii) The item relating to section 951A in the table of sections for subpart F of part III of subchapter N of chapter 1 is amended by striking “Global intangible low-taxed income” and inserting “Net CFC tested income”.

(b) Deduction for foreign-derived deduction eligible income.—

(1) IN GENERAL.—Section 250(a)(1)(A) is amended by striking “foreign-derived intangible income” and inserting “foreign-derived deduction eligible income”.

(2) CONFORMING AMENDMENTS.—

(A) Section 250(a)(2) is amended by striking “foreign-derived intangible income” each place it appears and inserting “foreign-derived deduction eligible income”.

(B) Section 250(b), as amended by subsection (a), is amended—

(i) by striking paragraphs (1) and (2),

(ii) by redesignating paragraphs (4) and (5) as paragraphs (1) and (2), respectively, and by moving such paragraphs before paragraph (3),

(iii) in paragraph (2)(B)(ii), as so redesignated, by striking “paragraph (4)(B)” and inserting “paragraph (1)(B)”, and

(iv) by striking “intangible” in the heading thereof and inserting “deduction eligible”.

(C) (i) The heading for section 250 is amended by striking “intangible” in the heading thereof and inserting “deduction eligible”.

(ii) The heading for section 172(d)(9) is amended by striking “intangible” and inserting “deduction eligible”.

(iii) The item relating to section 250 in the table of sections for part VIII of subchapter B of chapter 1 is amended by striking “intangible” and inserting “deduction eligible”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.