Estes Introduces Bill to Update US International Tax Rules

Rep. Ron Estes (R-Kansas) on Wednesday introduced the U.S. Innovation and Global Competitiveness Act of 2026, which would improve the international tax rules for companies that operate both in the U.S. and overseas. It will ensure that America remains the most innovative country in the world for decades to come.

The bill builds on the international tax system created by the 2017 Tax Cuts and Jobs Act and made permanent by the Working Families Tax Cuts. The 2017 law created the base erosion and anti-abuse tax, known as BEAT, along with global intangible low-taxed income and foreign-derived intangible income. The Working Families Tax Cuts made BEAT permanent, along with updated versions of the other two provisions, now called net controlled foreign corporation tested income, or NCTI, and foreign-derived deduction eligible income, or FDDEI.

Rep. Estes' bill would narrow when BEAT applies to payments made overseas, reduce double taxation on U.S. companies' foreign earnings and make it easier for companies to bring intellectual property back to the United States.

"When it comes to international taxes, American businesses and workers should come first," Estes said. "Here in the Air Capital of the World, we know that aerospace and a host of other industries compete in the global marketplace. The Tax Cuts and Jobs Act and the Working Families Tax Cuts made the United States the best place in the world to build a business and invest in our communities. Our international tax system should support that, not penalize American companies for growing around the world. This bill keeps our protections against profit shifting in place while making sure U.S. job creators aren't hit with double taxation or penalized for routine business payments that don't erode our tax base. It also makes clear that digital services taxes or other discriminatory taxes that target American companies are still treated as base eroding. This legislation is the first step in laying out the House Republican vision for the future of international tax policy."

Background

The U.S. Innovation and Global Competitiveness Act would:

● Exclude payments already subject to U.S. tax from BEAT, allow general business credits to count against BEAT liability and keep domestic tax credits from increasing a company's BEAT bill. The bill also creates a high-tax exception for payments to related foreign companies that pay an effective tax rate of at least 18.9%, or 90% of the U.S. corporate rate. The exception would not apply to countries that impose digital services taxes or other discriminatory taxes on U.S. companies.

● Eliminate the 10% reduction in foreign tax credits for NCTI, allow NCTI losses to be carried forward for up to five years and allow those foreign tax credits to be carried forward and back like other business credits. The bill also reduces the number of foreign tax credit categories from four to two and gives the Treasury Department more flexibility on foreign tax redeterminations.

● Raise the FDDEI deduction to 40% from 33.34%, remove the taxable income limit on the deduction and add a look-through rule for certain interest payments from foreign subsidiaries.

● Allow U.S. companies, for a limited time, to transfer intellectual property held by their foreign subsidiaries back to the United States without additional tax.

● Make other changes to the international tax code, including provisions related to Subpart F income, business interest deductions and the research credit.

Rep. Estes intends the bill as a starting point for the next round of international tax changes and a list of options for future tax legislation. He plans to gather additional feedback on the proposals through the rest of the year and into the 120th Congress.

View the full text of the bill here.