Entity Setup
How to Structure Your Business Entity After the One, Big, Beautiful Bill
Entity-owners, especially in pass-throughs or foreign contexts, must review how recent statutory reforms affect entity taxation and deductions under OBBB.
By NomadicTax Research Team • 5-8 min read • February 24, 2026
## Key Entity Setup Changes Under OBBB
The One, Big, Beautiful Bill (P.L. 119-21) introduced or altered several entity-level and shareholder-level provisions. Changes include modifications to clean energy incentives and the treatment of foreign corporations for U.S. shareholders.([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
## Modified Treatment of Controlled Foreign Corporations (CFCs)
One of the more complex areas relates to Sections 951 and 951A. OBBB’s transition rule shifts how dividends and subpart F or **Global Intangible Low-Taxed Income (GILTI)** are allocated when stock is acquired mid-year.([irs.gov](https://www.irs.gov/irb/2025-52_IRB?utm_source=openai))
- Distributions paid or deemed paid must be carefully tracked against ownership periods.
- Foreign tax credits are affected when portions are excluded under updated rules.([irs.gov](https://www.irs.gov/publications/p514?utm_source=openai))
## Clean Energy & Entity Credits Expiration Considerations
Several credits for entities or their investors (e.g., clean vehicle, used clean vehicle, home energy improvement) have **accelerated expiration dates** post-OBBB. Entities planning investments in clean energy must factor these deadlines into structuring and timing.([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
## Entity Example: Foreign-Owned LLC
Consider a U.S. LLC owned by foreign shareholders that holds foreign subsidiaries treated as CFCs:
1. Under OBBB’s transition rule, if the foreign corp pays a dividend before Jan 1, 2026, or deemed so, the U.S. shareholder may reduce the subpart F or tested income inclusion based on **days-owned** during the CFC’s taxable year.([irs.gov](https://www.irs.gov/irb/2025-52_IRB?utm_source=openai))
2. Foreign taxes paid on excluded income under section 959 may now be partially disallowed for foreign tax credit purpose per new section 960(d)(4).([irs.gov](https://www.irs.gov/publications/p514?utm_source=openai))
## Action Plan for Business Owners & Entities
- Update your **ownership tracking systems** to monitor when stock, subsidiaries, or partnerships are acquired or disposed mid-year.
- For pass-through entities, review how clean energy and other tax credits phase out so your investment doesn’t lose eligibility due to timing.
- Consult Publication 514 and related IRS guidance for foreign tax credits and deductions when foreign taxes are involved.
- Assess if your entity qualifies for clean fuel production credits under new rules (Section 45Z), which now require feedstock location and emissions rate qualification.([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
Many entity structure decisions hinge on beginning and end dates relative to 2025, when several new effective dates take place. Plan ahead to preserve benefits.