In February 2015, the Obama administration wanted Congress to tax the foreign profits of US multinationals country by country, with a minimum rate. Congress never passed it. The 2017 tax law built a different minimum tax, and the 2025 reconciliation act rewrote that one.
The 2015 Obama plan for US multinationals
Before 2018, a US parent owed nothing on a foreign subsidiary’s active earnings until it repatriated them. Treasury’s General Explanations for fiscal year 2016 argued that deferral pushed production and profits offshore. It also objected to credits from high-tax income that sheltered low-taxed royalties.
Its answer, published on February 2, 2015, was a minimum tax charged country by country. A 2012 framework would also have cut the corporate rate to 28%, or 25% for manufacturers.
| 2015 measure for US multinationals | What a US group would have faced |
| Minimum tax on foreign earnings | US tax every year on foreign subsidiary and branch earnings, at 19% less 85% of the local effective rate |
| Allowance for corporate equity | No minimum tax on a risk-free return on equity invested in active assets |
| Dividends from abroad | No further US tax on earnings brought home |
| One-time tax on past earnings | 14% on earnings already held untaxed in foreign subsidiaries, payable over five years |
| Inversion rules | An inversion once former US owners held more than 50%, down from 80%. A larger US company managed and controlled in the United States could also count as inverted when the group lacked substantial business in the acquirer’s country |
| Interest deductions | Net interest of a US member capped at its share of the group’s net interest, based on its share of group earnings |
The budget tied the one-time tax to transportation spending. Treasury put the untaxed foreign earnings of US companies at 1trillion-2 trillion. None of the package passed before the administration left office in January 2017.
Treasury’s own rules on inversions and debt
Treasury didn’t wait for Congress on inversions. Notice 2014-52 of September 22, 2014, went after the structure of the deal itself and the planning a group did with its foreign subsidiaries afterward. Notice 2015-79 of November 19, 2015, made the acquirer prove tax residence in the relevant country to pass the business activity test.
Serial acquirers came next. Under temporary regulations of April 8, 2016, an acquirer that bought US companies in the previous 36 months can’t count the stock attributable to them. T.D. 9834 made those regulations final on July 12, 2018.
In October 2016, Treasury also turned to related-party debt. Its regulations under section 385 demanded documentation for that debt and treated some of it as stock. The documentation rules didn’t survive. T.D. 9880 withdrew them from November 4, 2019, but the distribution rules stayed in place.
What the 2017 law kept and dropped
Congress passed the Tax Cuts and Jobs Act, Public Law 115-97, in December 2017, nearly three years after the Obama plan. Its corporate rate is 21%. On foreign earnings, US parents pay a minimum tax known as GILTI (global intangible low-taxed income). It’s due every year, even when the subsidiaries pay no dividend.
| 2015 measure | What the 2017 law did with it |
| Minimum tax on foreign earnings | Kept the idea as GILTI, at an effective 10.5% before credits in Treasury’s estimates, with credit for 80% of foreign taxes |
| Country-by-country calculation | Dropped. All foreign income is averaged together |
| Allowance for corporate equity | Replaced with a tax-free return of 10% of qualified business asset investment |
| Dividends from abroad | Kept, as a full deduction for the foreign-source part of dividends from 10%-owned foreign companies |
| One-time tax on past earnings | Kept, at 15.5% on cash and 8% on other assets, payable in up to eight installments |
| Lower inversion threshold | Dropped. The 60% and 80% tests stayed in place |
From GILTI to NCTI
Public Law 119-21, signed on July 4, 2025, renamed GILTI as net CFC tested income, or NCTI. The CFC in that name is a controlled foreign corporation, a foreign company that US shareholders control. The act also repealed the tax-free return on tangible assets for tax years beginning after December 31, 2025.
| Provision of US law | Rule through 2025 | Rule from 2026 |
| Section 250 deduction for the minimum tax | 50% deduction, set to decrease to 37.5% | 40% deduction |
| US rate on the inclusion | 10.5% before credits, in Treasury’s estimates | 12.6% before credits, by calculation. Senate Finance staff put the effective rate at 14% after the 10% credit reduction |
| Deemed-paid credit for foreign taxes | Credit for 80% of foreign taxes | Credit for 90% of foreign taxes |
| Deduction for foreign-derived income | 37.5% for foreign-derived intangible income (FDII), set to decrease to 21.875% | 33.34% for foreign-derived deduction eligible income (FDDEI), as FDII is now called. Treasury puts the effective rate at 14% |
| Base erosion minimum tax | 10% rate, set to increase to 12.5% | 10.5% rate |
From 2026, a company allocates no interest or research expense to NCTI when it computes its foreign tax credit limit. The act also denies credits for a tenth of the foreign taxes on distributed NCTI earnings. Treasury’s rules apply that cut to inclusions in tax years ending after June 28, 2025.
In tax years after 2024, a company again adds depreciation and amortization back into adjusted taxable income under Section 163(j). From 2026, CFC inclusions no longer count in that income. The interest cap narrows for groups with large foreign inclusions.
Tax years and ownership of foreign subsidiaries
Before the act, a foreign subsidiary could elect to end its tax year one month before its US parent. The act repealed that election. Take a subsidiary with a November 30 year end owned by a calendar-year parent. It had a one-month short year ending December 31, 2025, and its later years match the parent’s.
A shareholder that owns CFC stock on any day of the CFC’s year now reports subpart F income for the days it held the stock. Treasury proposed pro rata share rules in August 2026. Comments are due by October 26, 2026.
Congress also restored the limit on downward attribution, so a US person no longer counts as owning stock that a foreign owner holds. A new section 951B still applies the inclusion rules to some US owners of foreign-controlled foreign companies.
US tax proposals still open in 2026
Several Treasury rules for the 2025 act are still in draft. Comments on the proposed FDDEI rules for property sales were due by October 5, 2026. The proposed allocation of expenses to NCTI is open for comment until November 10, 2026.
Section 7805 allows retroactive effect for rules that Treasury issues within 18 months of enactment. The window for the 2025 act closes on January 4, 2027. If Treasury finalizes the FDDEI rules by then, as it expects to, they can apply from enactment.
Members of Congress have put forward their own proposals. H.R. 10431, from Representative Ron Estes, would raise the FDDEI deduction to match the NCTI deduction and repeal the 10% credit reduction. The Stop Corporate Inversions Act of 2026 would revive the 2015 inversion tests.
Treasury hasn’t published a budget volume since March 2024, when the General Explanations for fiscal year 2025 came out. There’s none for 2026 or 2027 on its revenue proposals page.
FAQ
Did Obama’s per-country minimum tax ever become law?
No, the per-country design never passed. GILTI and NCTI pool income and taxes from all foreign subsidiaries. Treasury’s FY2025 budget proposals call that method “global averaging.” The 2025 act kept it.
Can Congress tax foreign earnings before they’re paid out?
Yes, in some cases. In Moore v. United States, decided 7-2 on June 20, 2024, the Supreme Court upheld the one-time tax. Congress may tax American shareholders on the realized but undistributed income of a foreign company they control, the majority held. It stressed that the holding was narrow.
Do US groups still face foreign minimum taxes?
Yes, through local top-up taxes on their foreign subsidiaries. The 2026 side-by-side package exempts US-parented groups only from the income inclusion and undertaxed profits rules. A subsidiary in a country with a domestic top-up tax will pay it there, whatever the parent elects.