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 July 4, 2025. 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 favorable 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 capitalization provisions and exclude certain controlled foreign corporate (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 of excessive employee compensation (including for tax-exempt organizations) and employer-provided meal expenses 

• New opportunity zone investment rules 

• Various other changes for the corporate alternative minimum tax; certain income exclusions for qualifying financial institutions; an increase in the amount of shares for taxable REIT subsidiaries; an expansion of contracts eligible for percentage of completion method to determine income.  

State and local tax legislation may also change due to the OBBBA. While the majority of states will automatically conform to the enacted tax changes due to the rolling conformity to federal tax law, or by using federal taxable income as a starting point, a number of states have static conformity and will not automatically adopt such changes without legislative action.

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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 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 (such as so-called Section 899, which was not enacted) 

Instead, the United States and other G7 members (Canada, France, Germany, Italy, Japan, and the United Kingdom) announced an agreement that certain aspects of Pillar Two should not apply to US multinationals and their subsidiaries. This understanding will have to be further discussed and developed with the non-G7 members of the OECD’s Inclusive Framework (IF). It’s expected that the shared G7 understanding will be issued as administrative guidance (e.g. one or more safe harbours) to be agreed by IF member countries and will then need to be reflected in the national laws of IF member countries. 

Note also that consensus on so-called ‘Pillar One’ has also 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 US then announced a broad package of US import tariffs on April 2, 2025 – a day President Trump called ‘Liberation Day’. Since this time, the administration has been negotiating trade deals with a multitude of countries that will ultimately be formalized in written trade agreements.  

Shifting regulatory landscape

The US regulatory landscape has been dramatically altered as a result of the Supreme Court’s recent 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 10 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. 

Note that the US Treasury was granted authority to issue regulations by several provisions within the OBBBA; it’s unclear what path Treasury will take to accommodate the above guardrails to issue more guidance.