United States

United States (US) tax reform enacted in July 2025

The One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump on 4 July 2025. The OBBBA permanently extends, with modifications, certain business and international tax provisions enacted as part of the 2017 Tax Cuts and Jobs Act (P.L. 115-97 or so-called TCJA) that were set to change at the end of 2025. The new law includes various business tax relief measures, as well as revenue-raising measures that were intended to offset part of the cost of the legislation.

New provisions include, for example: 

• Permanent restoration of 100% bonus depreciation, expensing for US-based research, and the EBITDA-based business interest expense limitation.

• Temporary bonus depreciation for qualified production property.

• Modification, termination, and acceleration of the phase-out of a wide range of the 2022 Inflation Reduction Act (IRA) clean energy tax credits.

• Significant changes to various international tax provisions, including:

• • A more favourable effective tax rate for global intangible low-taxed income (GILTI), now called net CFC tested income (NCTI), than what the rate would have been in 2026 without legislation.
  • Changes to the foreign-derived intangible income (FDII), now called foreign-derived deduction eligible income (FDDEI), may increase taxpayers’ FDDEI deductions.
  • Ordering rules to calculate business interest expense limitation before applying most interest capitalisation provisions and exclude certain CFC-related items.
  • An increase to the base erosion and anti-abuse tax (BEAT) rate (previously scheduled to increase to a higher rate), while also modifying the calculation of allowable credits.
  • Modifications affecting foreign tax credits (e.g. income sourcing rules), as well as CFC tax years, attribution, and pro rata share rules.

• Adjustments to the deduction limitation on publicly held corporations for excessive employee compensation and to the excise tax on tax-exempt organisations for excessive employee compensation.
• Various changes to employer-provided fringe and health benefits.

• New opportunity zone investment rules.

• Various other changes for the corporate alternative minimum tax (CAMT).
• Certain income exclusions for qualifying financial institutions.
• An increase in the amount of shares for taxable real estate investment trust (REIT) subsidiaries.
• An expansion of contracts eligible for percentage of completion method to determine income.  

Multiple states have enacted legislation amending state conformity to the OBBBA. This includes both required modifications and potential recalculation of taxable income for state tax purposes.

Application of Pillar Two to US multinational corporations

Many countries continue to implement Pillar Two of the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework (IF) on Base Erosion and Profit Shifting (BEPS), which aims to establish a coordinated global minimum corporate tax rate. The Trump administration and Congressional Republicans announced opposition to the OECD proposals and considered retaliatory measures against companies based in jurisdictions enforcing such taxes.

The OECD subsequently announced that 147 members of the IF on BEPS have agreed to a new package of administrative guidance under the Pillar Two global minimum tax rules (the 'GloBE rules'). The IF-approved package includes several safe harbours, and most importantly, the United States is identified as qualifying for a side-by-side safe harbour under which multinationals headquartered in a qualifying jurisdiction are eligible to have no top-up tax under the Pillar Two Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) across all their domestic and foreign operations (including interests in joint ventures and joint venture subsidiaries).

Since domestic minimum top-up taxes continue to apply, many US-parented groups will remain subject to Pillar Two requirements even as the safe harbours are implemented across jurisdictions.

Note that consensus on so-called ‘Pillar One’ has been elusive.

New tariffs

President Trump announced in January of 2025 an ‘America First Trade Policy’ through an Executive Order (EO) aimed at reshaping US trade relations and encouraging domestic manufacturing. The EO calls for a review of the causes of US trade deficits and recommendations on tariffs or other measures that may be appropriate. The EO also states that the US-Mexico-Canada agreement and other trade agreements are to be reviewed and may be renegotiated.

The United States then announced a broad package of US import tariffs under the International Emergency Economic Powers Act (IEEPA) on 2 April 2025 – a day President Trump called ‘Liberation Day’. Since then, the administration has been negotiating trade deals with a multitude of countries that will ultimately be formalised in written trade agreements. In February 2026, the US Supreme Court held that IEEPA did not authorise the President to impose the broad reciprocal tariffs announced on ‘Liberation Day,’ creating potential refund issues for affected importers. The administration subsequently imposed a temporary global tariff under Section 122 of the Trade Act of 1974 (which expired in July 2026), and continues to rely on other statutory authorities, including Sections 232, 301, and 338. Tariff policy remains subject to frequent change.

Shifting regulatory landscape

The US regulatory landscape has been dramatically altered as a result of the Supreme Court’s decision in Loper Bright Enterprises. Loper overturned the Chevron doctrine, which had been in place for 40 years and generally required courts to defer to an administrative agency’s regulatory interpretation of a statute unless the agency interpretation was considered unreasonable.

The Trump administration has also instituted additional hurdles for new regulations. An Executive Order requires that whenever an agency promulgates a new rule, regulation, or guidance, it must identify at least ten existing ones to be repealed. It also requires that the total incremental cost of all new and repealed regulations be significantly less than zero. In addition, agencies must identify unlawful and potentially unlawful regulations in conflict with certain United States Supreme Court decisions.