The One Big Beautiful Bill Act (“OB3”), signed into law on July 4, 2025, represents the most sweeping overhaul of United States taxes since the 2017 Tax Cuts and Jobs Act (“TCJA”).[1] Among its many provisions, OB3’s international tax framework stands out not just for what it includes, but more importantly, for what it excludes. Notably, Congress rejected proposed Internal Revenue Code Section 899A, which would have implemented the Undertaxed Profits Rule (“UTPR”) under Pillar Two of the global minimum tax framework developed by the Organisation for Economic Co-operation and Development (“OECD”).

The OECD is an international governmental body comprised of thirty-eight member countries, including the United States, that works with global policy makers, stakeholders, and citizens to create international tax “policies that foster prosperity and opportunity,” while also focusing on issues such as social justice, tax evasion, education equality, and environmental challenges.[2] The OECD’s initiatives, including the Pillar One and Pillar Two projects, play a leading role in shaping international tax norms in countries all around the world.[3] Thus, Congress’s decision not to incorporate the OECD’s UTPR in OB3 represents not just a technical divergence, but a political signal of independence from a major global standard-setter.

When Congress first considered whether to align United States tax law with the OECD’s Pillar Two, it faced the challenge of reconciling two competing philosophies: the OECD approach and the United States approach. The OECD approach, adopted by over 140 jurisdictions globally, rests on the principle of a fifteen percent (15%) global minimum tax.[4] This tax is primarily enforced through the UTPR and the Income Inclusion Rule (“IIR”). The UTPR is a backstop mechanism that allows countries to deny deductions or make equivalent adjustments to multinational enterprises that are not subject to a fifteen percent (15%) effective tax rate in at least one jurisdiction, ensuring that low-taxed profits are ultimately “brought up” to the pre-determined global minimum.[5] The Income Inclusion Rule (“IIR”) requires parent companies to pay “top-up” taxes if their subsidiaries are taxed below fifteen percent (15%).

The United States approach, introduced under the TCJA, experimented with its own policies intended to limit profit-shifting and tax the foreign income of United States multinational corporations (“MNC”).[6] The TCJA framework imposed three minimum taxes: Global Intangible Low-Taxed Income (“GILTI”), Base Erosion and Anti-Abuse Tax (“BEAT”), and Foreign-Derived Intangible Income (“FDII”). GILTI was designed to tax certain foreign profits of United States-based corporations, and was calculated as the total active income earned by a United States firm’s foreign affiliates that exceeds ten percent (10%) of the firm’s depreciable tangible property.[7] BEAT targeted deductible payments made to related foreign entities, such as interest or royalties, by requiring certain large corporations to add such payments back into taxable income and pay a minimum tax designed to deter profit shifting.[8] The FDII deduction reduces the effective tax rate for United States-based corporations on certain foreign-derived income that exceeds a ten percent (10%) return on tangible assets, effectively providing a tax benefit for export-related profits often linked to intangibles.[9] Ultimately, the TCJA’s framework diverged too far from the OECD’s Pillar Two structure. This divergence likely prompted the proposal of Section 899A as a defensive measure and, in turn, paved the way for the comprehensive reforms enacted in OB3.

OB3 represents not a convergence with the OECD model, but a refinement of the pre-existing United States model. The new statute rebrands GILTI as Net Controlled Foreign Corporation Tested Income (“NCTI”), that is, certain foreign earnings of United States-owned Controlled Foreign Corporations (“CFCs”). Under the new laws of OB3, NCTI is subject to a forty percent (40%) deduction under Internal Revenue Code § 250 (down from fifty percent (50%)) and a ninety percent (90%) foreign tax credit (up from eighty percent (80%)).[10] Additionally, OB3’s repeal of the Qualified Business Asset Investment (“QBAI”) exclusion ensures a broader tax base, raising the effective minimum tax on foreign subsidiary earnings to roughly fourteen percent (14%).[11]

Additionally, FDII was made permanent, with a deduction that results in an effective rate of about thirteen and one eighth percent (13.125%) on qualifying export income, and BEAT was softened, with its rate fixed at ten and one half percent (10.5%) rather than rising to fifteen percent (15%).[12] Taken together, these adjustments signal Congress’s preference for permanence and simplicity, offering multinationals certainty while rejecting additional enforcement layers.

One of the most striking aspects of OB3 is that, despite being in its early stages, the international community has already treated its provisions with a level of respect comparable to the OECD’s Pillar Two rules. Although the OECD’s Pillar Two framework allows countries to apply UTPRs against multinationals based in jurisdictions that decline to adopt them, major foreign trading partners in the Group of Seven (“G7”)[13] have acknowledged NCTI as achieving the substance of a minimum tax, even if the rules do not align in form.[14] In late June 2025, the G7 announced a “side-by-side” understanding under which United States-parented groups would be fully excluded from the UTPR and IIR, so long as OB3’s NCTI remained in force.[15] This effectively neutralized the risk of duplicative taxation for United States-multinationals, signaling tacit acceptance of Washington’s “functional equivalence” approach.[16]

Notwithstanding the G7, more than one hundred countries remain committed to the OECD’s framework, with many phasing in Pillar Two beginning in 2025 and 2026.[17] This divergence raises questions about the durability of the global minimum tax project. If the United States—home of the world’s largest economy—can deviate from the OECD framework while avoiding retaliation, other countries may follow suit.[18] On the other hand, the G7’s deference may reflect a unique accommodation for the United States, perhaps due to the size of its economic footprint and the centrality of its MNCs to global trade.

For business and law, the implications are significant. MNCs can now plan around a more stable United States regime, with NCTI and FDII made permanent in law.[19] Yet uncertainty remains in cross-border contexts, particularly over whether OECD members outside the G7 will continue to tolerate the United States approach or eventually retaliate by applying UTPRs to United States companies. Congress’s omission of Section 899A provides near-term relief for United States MNCs, but it remains to be seen whether global tax coordination can sustain itself when its largest participant insists on charting its own course.[20] If so, what is currently a one-off exception could become international  precedent, and could be the first crack in the theoretical foundation of a global minimum tax cemented by Pillar Two.

[1] The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, was the most significant U.S. tax reform since 1986. It permanently lowered the corporate tax rate from 35% to 21%, introduced a quasi-territorial system of international taxation, and temporarily reduced individual income tax rates. The TCJA also nearly doubled the standard deduction, capped state and local tax (SALT) deductions, and overhauled business taxation with provisions like the qualified business income deduction. Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017).

[2] OECD, https://www.oecd.org/en/about.html (last visited Sept. 13, 2025).

[3] Global Anti-Base Erosion Model Rules (Pillar Two), OECD, https://www.oecd.org/en/topics/sub-issues/global-minimum-tax/global-anti-base-erosion-model-rules-pillar-two.html (last visited Sept. 13, 2025).

[4] Id.

[5] Id.

[6] What is the TCJA tax on global intangible low-taxed income and how does it work?, TAX POLICY CENTER, https://taxpolicycenter.org/briefing-book/what-tcja-tax-global-intangible-low-taxed-income-and-how-does-it-work (last visited Sept. 13, 2024).

[7] Id.

[8] Id.

[9] Alan Cole, The Impact of GILTI, FDII, and BEAT, TAX FOUNDATION (Jan. 31, 2024), https://taxfoundation.org/research/all/federal/impact-gilti-fdii-beat/.

[10] One Big Beautiful Bill Act, Pub. L. No. 119-21, 139 Stat. 72.

[11] Id.

[12] Id.

[13]  The G7 is an intergovernmental political and economic forum consisting of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. It brings together these advanced economies to coordinate on global economic policy, security, and development issues. Ellora Onion-De et al., What Does the G7 Do?, COUNCIL ON FOREIGN RELATIONS (July 8, 2025), https://www.cfr.org/backgrounder/what-does-g7-do.

[14] Joint Statement by the G7 on International Tax, U.S. DEP’T OF THE TREASURY (June 28, 2025), https://home.treasury.gov/news/press-releases/sb0181.

[15] Kashif Javed, G7 Statement on global minimum taxes, KPMG (July 10, 2025), https://kpmg.com/uk/en/insights/tax/tmd-g7-statement-on-global-minimum-taxes.html.

[16] G7 issues statement on global minimum taxes, ERNST & YOUNG (July 9, 2025), https://www.ey.com/en_gl/technical/tax-alerts/g7-issues-statement-on-global-minimum-taxes.

[17] Pillar Two Country Tracker, PWC (Sept. 3, 2025), https://www.pwc.com/gx/en/services/tax/pillar-two-readiness/country-tracker.html.

[18] Caleb Silver, The Top 25 Economies in the World, INVESTOPEDIA (Jan. 29, 2025), https://www.investopedia.com/insights/worlds-top-economies/.

[19] Global taxation reform: What changes to GILTI and FDII mean for multinationals, RSM (Sept. 12, 2025), https://rsmus.com/insights/services/business-tax/global-taxation-reform-gilti-fdii-mean-for-multinationals.html.

[20] See Gary Clyde Hufbauer, How US multinationals escaped the global minimum corporate tax, PIIE (July 7, 2025), https://www.piie.com/blogs/realtime-economics/2025/how-us-multinationals-escaped-global-minimum-corporate-tax.