Tax Planning
Navigating the New US Global Minimum Tax Rule Changes Under TCJA and OBBBA
How recent IRS proposed regulations reshape global minimum tax for U.S. multinationals under GILTI, FDDEI, and upcoming changes to the One-Big-Beautiful-Bill.
By NomadicTax Research Team • 5-8 min read • September 16, 2026
## Overview
In September 2026, the IRS issued new **proposed regulations** building on the changes introduced by the *One, Big, Beautiful Bill Act* (OBBBA). These target the global intangible low-taxed income (GILTI) regime, **foreign-derived deduction-eligible income** (FDDEI), and how foreign tax credits and foreign income are allocated under section 898 and 960.([irs.gov](https://www.irs.gov/irb/2026-38_irb?utm_source=openai)) These changes are crucial for multinationals and any entity dealing with cross-border income and tax credits.
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## What’s Changing: Key Regulatory Proposals
| Topic | What’s New |
|---|---|
| FDDEI vs DEI Limitation | FDDEI continues to be limited by Deduction-Eligible Income (DEI), meaning FDDEI cannot exceed DEI under proposed § 1.250(b)-1(c)(12).([irs.gov](https://www.irs.gov/irb/2026-38_irb?utm_source=openai)) |
| GILTI / Foreign Corporation Rules | Controlled Foreign Corporations (CFCs) may have different foreign currency gain/loss treatment under section 987, especially in inbound transactions.([irs.gov](https://www.irs.gov/irb/2026-37_irb?utm_source=openai)) |
| Foreign Tax Credits & Section 898/960 | New rules allocate foreign taxes for foreign corporations after the repeal of a one-month deferral election; also, some foreign tax credits will be disallowed, particularly in distributions of previously taxed earnings and profits.([irs.gov](https://www.irs.gov/irb/2026-37_irb?utm_source=openai)) |
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## Why This Matters (Implications for Tax Planning & Compliance)
- **Global Minimum Tax Compliance**: These rules feed directly into Minimum Tax obligations under the OECD Pillar Two model, affecting how U.S. entities calculate top-up and income inclusion taxes.
- **Foreign Tax Credit Planning**: Distribution of previously taxed earnings and flexibility to use foreign credits will be more limited under the new proposed regulations. Strategies relying on offsetting foreign taxes must be re-evaluated.
- **Currency Risk for CFCs**: With new guidance under section 987, foreign currency gains/losses may now trigger U.S. tax effects in cases previously sheltered, impacting P&L and hedging strategies.
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## Actionable Steps for Multinational Corporations
1. **Inventory all foreign operations**: Identify all foreign corporations, foreign income sources, and foreign taxes paid or accrued.
2. **Review existing accounting practices**: Especially how foreign taxable years align with U.S. fiscal periods to ensure correct allocation under the proposed § 1.898(c).
3. **Examine current DEI-based deductions and FDDEI-eligible income classification**: Ensure transactions and revenue streams are documented to support FDDEI eligibility under DEI.
4. **Stay engaged in the comment process**: Comments for REG-103844-26, REG-115145-25, etc., are open until mid-September 2026. Early feedback can influence the final rules.([irs.gov](https://www.irs.gov/irb/2026-37_irb?utm_source=openai))
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## Example Scenarios
- **Scenario A: U.S. Tech Parent with Foreign Subsidiary**
A U.S. parent company has a foreign subsidiary earning intangible income. Under the new FDDEI proposal, if much of the income is excluded by DEI thresholds, FDDEI benefit shrinks. The company must calculate carefully whether certain income (like distributions or foreign branch income) qualifies.
- **Scenario B: CFC with 53-Week Foreign Taxable Year**
After the repeal of the one-month deferral election, if a CFC’s foreign taxable year straddles transition periods, foreign taxes may need to be split between U.S. tax years using proposed allocation rules. Misallocation could lead to timing issues or incorrect tax liabilities.
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## Compliance Timeline & Status
- These proposals were published in IRB 2026-38 and 2026-37 around **early to mid-September 2026**, and carry **proposed** status.([irs.gov](https://www.irs.gov/irb/2026-38_irb?utm_source=openai))
- Most rules will be effective for taxable years beginning **after June 16, 2025**, but finalization is expected by **January 4, 2027**.([irs.gov](https://www.irs.gov/irb/2026-38_irb?utm_source=openai))
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## Next Steps Summary
- Adjust tax models and systems to reflect potential reductions in foreign tax credits and revisions to FDDEI computations.
- Consider restructuring or timing income/distributions to maximize benefits under new regulations.
- Coordinate with tax advisors to quantify the financial impact and adjust forward planning.
**Bottom line**: These IRS proposals significantly change the terrain for global minimum tax, foreign tax credits, and foreign income treatments. Multinationals need to act now to align accounting practices and operating structures ahead of final implementation.