International, Administrative, and Excise Tax Provisions in the One Big Beautiful Bill Act - Part 2 – Image 1
icon July 07, 2025
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INTERNATIONAL TAX, Administrative Law, Higher Education Tax, Tax Compliance

One Big Beautiful Bill Act international and administrative tax changes introduce significant reforms to the global tax framework, IRS reporting requirements, and excise taxes. Enacted in 2025, these provisions aim to modernize compliance, enhance transparency, and ensure fairness for multinational corporations and other taxpayers. This part will break down the key international provisions, administrative updates, and excise tax changes, providing a comprehensive understanding for taxpayers, multinational corporations, nonprofit organizations, and financial professionals.

International Provisions

Global Intangible Low-Taxed Income (GILTI) Overhaul

One of the most significant international tax changes in the One Big Beautiful Bill Act (OBBBA) is the overhaul of the GILTI regime. The law renames GILTI as “Net CFC Tested Income” (NCTI) and makes several technical and structural adjustments. The NCTI deduction percentage is set at 40% for tax years beginning after December 31, 2025, which effectively results in a 14% tax rate on this income for U.S. shareholders of controlled foreign corporations (CFCs)14. The deduction for qualified business asset investment (QBAI) is eliminated, simplifying the calculation and reducing planning opportunities that previously allowed for lower effective rates.

In addition, the foreign tax credit (FTC) rules for NCTI are revised. The new law limits the ability to use high foreign taxes to offset U.S. tax liability on low-taxed foreign income, which will likely increase the effective tax rate for many multinational companies4. These changes are intended to align the U.S. system more closely with international minimum tax standards and to reduce incentives for profit shifting.

Foreign-Derived Intangible Income (FDII) Becomes FDDEI

The OBBBA also renames the Foreign-Derived Intangible Income (FDII) regime as “Foreign-Derived Deduction Eligible Income” (FDDEI). The deduction percentage is set at 33.34%, which results in a 14% effective tax rate, matching the NCTI rate14. The deduction for QBAI is also removed from this calculation, further streamlining the process and reducing the complexity of compliance for multinational corporations.

Base Erosion and Anti-Abuse Tax (BEAT) Changes

The Base Erosion and Anti-Abuse Tax (BEAT) is another major international provision affected by the new law. The BEAT rate is permanently set at 10.5% for tax years beginning after December 31, 20254. Notably, the OBBBA removes the exception for payments to high-tax foreign affiliates, broadening the scope of the BEAT and making it harder for multinational companies to use intercompany payments to reduce their U.S. tax liability. This provision is expected to increase the effective tax rate for some companies with significant cross-border transactions.

Controlled Foreign Corporation (CFC) and Look-Through Rule

The OBBBA makes the look-through rule for CFCs permanent. This rule allows certain payments between related foreign corporations to be excluded from U.S. taxation, provided the income is not repatriated to the United States4. By making this rule permanent, the law provides greater certainty and planning flexibility for U.S. multinationals with complex international structures.

Foreign Tax Credit (FTC) Adjustments

The law also revises the foreign tax credit rules to align with the new NCTI and FDDEI regimes. The FTC limitation is now calculated on a country-by-country basis, rather than on an overall or pooling basis. This change is designed to prevent taxpayers from using excess credits from high-tax jurisdictions to offset U.S. tax on low-taxed foreign income4. The new rules also clarify the treatment of previously taxed earnings and profits (PTEP) and distributions subject to Section 951 taxes, ensuring that double taxation is avoided while closing certain loopholes.

Hybrid Mismatch and Transfer Pricing Rules

The OBBBA tightens rules to prevent hybrid mismatch arrangements, which exploit differences in tax treatment between countries to achieve double non-taxation or deduction/non-inclusion outcomes4. The law also authorizes the Treasury Department to issue new guidance on transfer pricing, aiming to ensure that profits are appropriately allocated between U.S. and foreign affiliates based on economic substance and arm’s length principles.

Reporting and Compliance for Multinationals

Enhanced reporting requirements for multinational corporations are introduced to increase transparency and facilitate enforcement. These include expanded disclosures of cross-border transactions, related-party payments, and country-by-country reporting of income, taxes paid, and business activities4. These measures are intended to support IRS enforcement efforts and align U.S. reporting standards with global initiatives such as the OECD’s Base Erosion and Profit Shifting (BEPS) project.

Administrative Provisions

Increased Information Reporting Thresholds

The OBBBA raises the reporting threshold for payments that must be reported on IRS Forms 1099-MISC and 1099-NEC from $600 to $2,000, indexed for inflation3. This change reduces the compliance burden for small businesses and individuals making infrequent or low-value payments, while maintaining transparency for larger transactions.

For third-party settlement organizations, such as payment processors and online marketplaces, the threshold for reporting payments on Form 1099-K is increased to $20,000 and 200 transactions per year. This is a significant increase from the previous $600 threshold, and it is intended to reduce the reporting burden for casual sellers and gig economy workers3. Backup withholding will now only apply to amounts exceeding the reporting threshold.

Employee Retention Tax Credit (ERTC) Compliance

The OBBBA introduces stricter compliance and enforcement measures for the Employee Retention Tax Credit. The statute of limitations for ERTC refunds is extended to six years, and stricter eligibility requirements are imposed on credit promoters2. The IRS is also barred from issuing refunds for certain late ERTC claims. These changes are designed to reduce fraud and ensure the credit is used appropriately.

Expanded IRS and Treasury Guidance

The Treasury Department is given expanded authority to issue regulations and guidance to prevent tax avoidance schemes, particularly in areas such as university endowment taxation, hybrid mismatch arrangements, and transfer pricing4. This authority is intended to allow for a more agile response to emerging tax planning strategies and to close loopholes as they are identified.

Digital Asset Reporting

The OBBBA expands reporting requirements for digital asset transactions, including cryptocurrencies and other blockchain-based assets. Taxpayers and exchanges must now report a broader range of transactions, including sales, exchanges, and transfers of digital assets. This change is intended to ensure that gains from digital asset transactions are properly taxed and to improve compliance in a rapidly growing area of the economy.

User Fees and Taxpayer Advocate Service

The law authorizes the IRS to increase certain user fees to fund enforcement and taxpayer services. Additional funding is also provided to the Taxpayer Advocate Service, which assists taxpayers in resolving disputes and navigating the new tax rules. These measures are intended to improve the overall functioning of the tax system and support taxpayer rights.

Excise Tax Provisions

Excise Tax on Remittance Transfers

A new 1% excise tax is imposed on certain remittances from the United States to foreign recipients. Remittance providers are responsible for collecting the tax at the time of transfer and are secondarily liable if the tax is not collected4. This provision is designed to generate revenue and ensure that cross-border transfers are properly reported. The excise tax applies to a broad range of financial institutions and money transmitters, and is expected to impact both individuals and businesses making international payments.

University Endowment Tax

The OBBBA creates a tiered excise tax regime for private colleges and universities with large endowments. Previously, the Tax Cuts and Jobs Act imposed a 1.4% excise tax on net investment income for institutions with at least 500 tuition-paying students and at least $500,000 in assets per student. The new law introduces a more nuanced system, where the rate depends on the institution’s “student-adjusted endowment” and only applies to those with at least 3,000 tuition-paying students and at least $500,000 per student5. The rates increase for institutions with larger endowments, and the tax base is expanded to include additional assets. The Treasury is authorized to issue guidance to prevent tax avoidance schemes related to endowment management.

Expanded Executive Compensation Excise Tax

The excise tax on executive compensation over $1 million is expanded to include all employees of tax-exempt organizations, not just the top five earners5. Certain former employees are also covered by this provision. The goal is to prevent tax-exempt organizations from using excessive compensation to avoid taxes and to ensure that nonprofit status is not abused for personal gain.

Other Administrative and Excise Provisions

  • Backup Withholding Adjustments: The law adjusts backup withholding rules to align with new reporting thresholds, reducing unnecessary withholding for small payments.
  • Taxpayer Identification Number (TIN) Requirements: Stricter TIN requirements are imposed for certain refundable credits and deductions, reducing the risk of fraudulent claims.
  • Expanded Penalties: New and higher penalties are introduced for failure to file information returns, underreporting income, and noncompliance with digital asset reporting rules.

Impact on Multinational Businesses and Nonprofits

The international, administrative, and excise tax provisions of the OBBBA are expected to have far-reaching effects on multinational corporations, nonprofit organizations, and educational institutions. Multinationals will need to review their global structures, transfer pricing policies, and compliance systems to ensure alignment with the new NCTI, FDDEI, BEAT, and FTC rules. Nonprofits and universities with large endowments or high executive compensation will face greater scrutiny and potentially higher tax liabilities. Digital asset traders and remittance providers must also adapt to new reporting and excise tax requirements.

Planning and Compliance Considerations

Given the complexity and scope of these changes, it is essential for affected organizations and individuals to consult with qualified tax professionals. Early action to review structures, update compliance systems, and monitor regulatory guidance will be critical for minimizing risk and taking advantage of any available planning opportunities. The IRS and Treasury are expected to issue further guidance on many of these provisions, so ongoing attention to updates will be necessary.

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