You have probably heard of the “One Big Beautiful Bill Act” which recently passed Congress and was signed by the President. This law has far-reaching effects in taxation for individuals, businesses, and beyond. This month we’re taking a close look at the key changes, so that you can see how you might be affected by them.
In this article, we take a close look at provissions of the act that fall outside of individidual and business taxation.
International provisions
Foreign tax credit limitation: The act treats deductions of a U.S. shareholder allocable to income in the global intangible low-tax income (GILTI) category as allocable to “net CFC tested income” (which is what the act turns GILTI into, see below).
Deemed paid credit: The act amends Sec. 960(d)(1) to increase the deemed paid credit for Subpart F inclusions from 80% to 90%.
GILTI and FDII: The act decreases the Sec. 250 deduction percentage for tax years beginning after Dec. 31, 2025, to 33.34% for foreign-derived intangible income (FDII) and 40% for GILTI, resulting in an effective tax rate of 14% for both FDII and GILTI. The act also proposes changing the definition of deduction-eligible income for purposes of determining FDII. The act also eliminates the use of a corporation’s deemed tangible income return for determining FDII and the use of net deemed tangible income return in determining GILTI. These changes result in the elimination of the terms FDII and GILTI, which will be renamed “foreign-derived deduction eligible income” and “net CFC tested income,” respectively.
BEAT: The act increases the base-erosion and anti-abuse tax (BEAT) rate from 10% to 10.5%.
Business interest limitation: The act provides that the Sec. 163(j) business interest limitation will be calculated prior to the application of any interest capitalization provision.
Administrative provisions and excise taxes
Third-party network transaction reporting threshold: The act reverts to the prior rule for Form 1099-K reporting, under which a third-party settlement organization is not required to report, unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200. The threshold had been phasing down and was scheduled to be $600 starting next year.
Form 1099 reporting threshold: The act increases the information-reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.
Firearms transfer tax: The act reduces the Sec. 5811 transfer tax on certain firearms.
Farmland sales: The act adds a new Sec. 1062 that allows income tax resulting from the sale of farmland to a qualified farmer to be paid in four annual installments.
Remittance transfer tax: The act imposes a 1% tax on “remittance transfers,” imposed on the sender. A remittance transfer for these purposes is a transfer of cash, a money order, a cashier’s check, or similar physical instrument. It does not include funds withdrawn from an account held with a financial institution or charged to a credit or debit card.
Under Section 919(g) of the Electronic Fund Transfer Act, a remittance transfer is an electronic transfer of funds requested by a sender to a designated recipient that is initiated by a remittance transfer provider. A remittance transfer provider is any person or financial institution that provides remittance transfers for consumers in the normal course of its business, whether or not the consumer holds an account with the financial institution.
Employee retention credit enforcement: The act requires employee retention credit (ERC) promoters to comply with due diligence requirements with respect to a taxpayer’s eligibility for (or the amount of) an ERC. The act applies a $1,000 penalty for each failure to comply. It also extends the penalty for excessive refund claims to employment tax refund claims. It also prevents the IRS from issuing any additional unpaid claims under Sec. 3134, unless a claim for a credit or refund was filed on or before Jan. 31, 2024.
SSN requirements: The act imposes an SSN requirement for claiming an American opportunity or lifetime learning credit under Sec. 25A.
This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.