For years, the U.S. international tax regime has been a patchwork of clever acronyms, cross-references, and allocation rules that too often produced ambiguous, burdensome, and sometimes unfair results. With Sections 70311–70323, Congress didn’t just tweak the system — it simplified and clarified it in ways that practitioners have been asking for since 2017. The changes make the law read more like what it actually does, curb double-penalties, and reduce the number of judgment calls that used to drive disputes and compliance cost.

Below is a detailed, plain-English walk-through and an opinionated take on why this package is a genuine step forward — even with a few trade-offs.

The Big Idea: Less Fiction, Fewer Frictions

Clear names, clearer math. “GILTI” is rebranded to net CFC tested income and “FDII” becomes foreign-derived deduction eligible income (FDDEI). That’s not just cosmetic; it aligns labels with reality and strips away the notion that we’re targeting “intangibles” when we’re really measuring broad CFC earnings and foreign-derived income.

Cleaner allocation rules. Congress stops the practice of stuffing broad, U.S.-side expenses (notably interest and R&E) into foreign-income buckets where they didn’t belong, which had been depressing foreign-source income and the foreign tax credit (FTC) limit.

Codified certainty. Sales and deemed dispositions of intangibles (including know-how) and depreciable/amortizable/depletable property are now explicitly inside the FDDEI/DEI framework. The statute now says what many regs and practices already implied — eliminating needless fights.

More credit where it counts. The deemed-paid FTC percentage rises (80% → 90%), with a targeted clawback to prevent double-dipping on later PTI distributions. This addresses a long-standing complaint about “residual U.S. tax” on genuinely taxed foreign income.

Five Pillars of Simplification (and What They Mean)

1) #70323 – From “GILTI” to Net CFC Tested Income; QBAI repeal

What changed:

The Code replaces the “GILTI” label with net CFC tested income and repeals the 10% deemed return on QBAI (the tax-free return on tangible assets).

Why it matters:

The old QBAI carve-out was a fiction that complicated modeling and encouraged asset-mix games.
Now, all tested income is in — simpler to compute, simpler to explain.
My take: This is the most honest version of the rule we’ve had. Yes, some groups will see higher inclusions (fewer carve-outs), but you trade complex planning knobs for predictability and transparency.

2) #70321 – A sensible recalibration of the §250 deduction1) #70323 – From “GILTI” to Net CFC Tested Income; QBAI repeal

What changed:

§250 deduction percentages are trimmed: FDDEI (formerly FDII) 37.5% → 33.34%; Net CFC tested income (formerly GILTI) 50% → 40%; The old post-2025 step-down paragraph is removed (replaced with these steady-state rates).

Why it matters:
Rates step up modestly from today but land below the harsher TCJA step-downs that would have hit in 2026.
Budget reality meets stability fewer moving parts to whipsaw long-term planning.
My take: Not perfect for taxpayers, but stable > yo-yo. This is the kind of predictability CFOs can model against.

3) #70311 – FTC limitation: stop misallocating interest & R&E

What changed:

For the foreign-source net CFC tested income basket in §904, Congress allocates the §250 GILTI deduction to that income, bars allocation of interest and R&E to it, and allows other deductions only if directly allocable.

Why it matters:

This raises the FTC limit by keeping unrelated U.S.-side expenses out of the foreign basket — addressing the “double disadvantage” companies faced (pay foreign tax, then shrink the very basket that determines how much of that tax you can credit).
Trade-off: Keeping U.S.-side R&E out of the foreign basket can, at the margins, increase the U.S. inclusion (you lose an offset you once took). But the creditability improvement usually matters more.
My take: A net fairness win — fewer arbitrary haircut mechanics and fewer allocation fights.

4) #70312 – Deemed-paid credit to 90%, with a PTI backstop

What changed:
§960(d)(1) deemed-paid FTC on tested income 80% → 90%; the §78 gross-up aligns to 90%.
Anti-double-dip: When PTI from prior GILTI/net tested income is later distributed, 10% of related foreign taxes is noncreditable.

Why it matters:

Up-front, more foreign tax is creditable — reducing residual U.S. tax. On the back end, you can’t recycle the last 10% through PTI distributions. My take: That’s a principled compromise: enhance creditability now, prevent gaming later.

5) #70322 – DEI/FDDEI scope and expense rules, codified

What changed:

DEI explicitly includes income/gain from sales and deemed dispositions of intangibles (as defined in §367(d)(4), e.g., patents, know-how, trademarks) and depreciable/amortizable/depletable property. Only properly allocable expenses can reduce DEI — interest and R&E are excluded from this allocation.

Why it matters:

Ends debates over whether know-how or patent sales “count.” Stops the erosion of the FDDEI base via broad overhead allocations. My take: This is the clarity taxpayers needed. The statute now mirrors the economic reality and prior regulatory direction.

Effective Dates You Can Actually Plan Around

June 16, 2025: Sales/deemed dispositions of intangibles and depreciable property start counting in DEI/FDDEI.

June 28, 2025: The 10% disallowance for credits related to PTI distributions (the anti-double-dip) begins to apply.

Tax years beginning after Dec 31, 2025 (i.e., 2026+): The rest — §250 percentages (33.34%/40%), the FTC allocation cleanup, the 90% deemed-paid credit & §78 gross-up, the renamings, and the QBAI repeal — all take effect.

Why This Package Reduces Ambiguity and Burden

1. Names match the base. “Net CFC tested income” says what’s taxed. You no longer brief boards on a rule called “global intangible low-taxed income” that plainly covered far more than intangibles.
   
2. Objective allocation rules. Moving interest and R&E out of the foreign basket (FTC) and out of DEI allocation shrinks the room for controversy, cuts compliance time, and limits recurring disputes over §861 apportionment.
   
3. Codified coverage for IP and asset sales. Practitioners no longer need to reconcile statutory silence with regulatory inclusion — the Code now speaks plainly.
   
4. Creditability is fixed at the right place. The 90% deemed-paid rule acknowledges real foreign tax, while the 10% PTI disallowance prevents getting paid twice. Cleaner, fairer, and easier to model.
   
5. Stable §250 regime. The new steady-state percentages avoid the TCJA cliff — fewer long-range surprises in tax effective rates.

The Trade-Offs (and Why They’re Acceptable)

More inclusions due to QBAI repeal and no U.S.-side R&E offset against foreign baskets can nudge U.S. tax up in some cases.

§250 percentages are less generous than 2025 law, though better than the original TCJA 2026 step-down.

Netting it out: The predictability and fairness gains (especially around creditability and definitional clarity) outweigh the rate bump for most multinationals. Finance teams can finally budget without wrestling as many moving parts.

Practical Next Steps for Tax Departments

Update models for 2026+: swap in 40%/33.34% §250 percentages; remove QBAI; apply 90% deemed-paid and the matching §78 gross-up.

Revise allocation engines: stop allocating interest and R&E to the net CFC tested income FTC basket or to DEI; keep only directly allocable expenses in DEI.

IP and asset transactions: treat post-June 16, 2025 sales/deemed sales of intangibles and depreciable property as DEI where foreign-derived — document foreign person/foreign use.

PTI tracking: flag post–June 28, 2025 distributions for the 10% noncreditable tax rule; ensure systems don’t attempt a full §901 credit.

Policy/communications: update internal guides to the new terminology (net CFC tested income, FDDEI) and remove QBAI references.

A Fairer, Plainer, More Workable System

These amendments don’t solve every complexity in international tax — nothing will — but they remove some of the worst frictions: fuzzy labels, over-broad expense allocations, uncertain treatment of IP sales, and a felt sense that foreign taxes weren’t getting their due. That’s a meaningful reset.

Bottom line: Congress delivered real simplification and clarification. Many of the uncertainties, ambiguities, and unfair, burdensome outcomes that plagued the post-2017 regime are materially reduced. Taxpayers get clearer rules, fewer disputes, and a system that’s closer to how the world — and modern supply chains — actually work.

We welcome your feedback, questions and ideas — comment below or email us at info@ifindtaxpro.com.

Interested in crypto accounting? Try Minutes Crypto — Digital-Asset Ledger & Tax Suite to streamline your workflow → minutescrypto.com