GILTI - now officially renamed Net CFC Tested Income (NCTI) by OBBBA (P.L. 119-21) - is a minimum tax on the foreign earnings of US shareholders in controlled foreign corporations. Created by the Tax Cuts and Jobs Act (TCJA) in 2017, GILTI applies to income not tied to physical assets abroad. OBBBA made the regime permanent, renamed it, eliminated the QBAI exemption, and reduced the §250 deduction to 40% permanently. This page uses "GILTI" throughout for searchability; the governing code section remains IRC §951A.
Effective for tax years beginning after December 31, 2025, OBBBA P.L. 119-21 renamed GILTI (Global Intangible Low-Taxed Income) to NCTI (Net CFC Tested Income). The §250 deduction for C-corporations was permanently reduced from 50% to 40%, producing an effective US tax rate of 12.6% (21% corporate rate × 60% net inclusion). The fundamental computation - tested income, tested loss, QBAI, and DTIR - remains the same. The rename and rate change are the primary OBBBA modifications to this regime.
This page uses NCTI throughout for post-2024 tax years. References to GILTI refer to the pre-OBBBA regime or the underlying IRC §951A statute (which retains the GILTI label in the code).
GILTI applies to any US shareholder - a US person who owns 10% or more of a Controlled Foreign Corporation (CFC). A CFC is a foreign corporation where US shareholders collectively own more than 50% of the stock by vote or value. IRC §957.
This includes US individuals, C-corporations, S-corporations, and partnerships that own CFC stock. The GILTI rules apply whether you are a large multinational or a US person who owns a small foreign company.
In plain terms: if your CFCs earn more than a 10% return on their physical assets (machinery, buildings, equipment), the excess is GILTI and must be included in your US income. Companies with heavy capital investment in physical assets abroad have low or no GILTI. Service businesses and IP-heavy businesses - which have little tangible property relative to income - typically have high GILTI exposure.
CFC income that was subject to an effective foreign tax rate of at least 90% of the US corporate rate can be excluded from GILTI. For 2026 with a 21% US corporate rate, this means foreign income taxed at 18.9% or higher may be excluded. The election is made annually and applies on a CFC-by-CFC basis. Treas. Reg. §1.951A-2(c)(7).
Income already included in the US shareholder's gross income under Subpart F (IRC §951) is excluded from GILTI tested income. No double taxation between Subpart F and GILTI.
An individual US shareholder can elect to be treated as a corporation for purposes of GILTI. This allows access to the IRC §250 deduction and foreign tax credits on GILTI inclusions. The trade-off: actual distributions from the CFC are then subject to a second level of tax as if they were corporate dividends. The §962 election is made annually. It is particularly valuable when the effective foreign tax rate is moderate and the individual faces high US marginal rates. IRC §962.
Foreign taxes paid by CFCs can offset GILTI liability, subject to limitations. The GILTI foreign tax credit basket is separate from the general foreign tax credit basket. There is a 20% haircut on foreign taxes creditable against GILTI (i.e., only 80% of foreign taxes are creditable). IRC §960(d). Foreign taxes in excess of the GILTI inclusion cannot be carried forward in the GILTI basket.
| Feature | Subpart F (IRC §951) | GILTI (IRC §951A) |
|---|---|---|
| Type of income | Passive, base-eroding, and other specified income | All CFC income above 10% return on tangible assets |
| Threshold | No threshold - dollar one is included | 10% × QBAI is exempt; only excess is included |
| Foreign tax credits | 100% creditability | 80% creditability through 2025; 90% creditability for 2026+ (NCTI) |
| §250 deduction (corporations) | Not applicable | 50% deduction (reduced to 40% permanently under OBBBA for tax years beginning after 2025) |
| Individual treatment | Included as ordinary income | Ordinary income unless §962 election made |
| Form | Form 5471, Schedule I | Form 8992 |
A US shareholder owns 100% of a foreign tech service company (CFC) with $1,000,000 of net income and $200,000 of depreciable tangible property (QBAI = $200,000).
NDTIR = 10% × $200,000 = $20,000. GILTI inclusion = $1,000,000 - $20,000 = $980,000.
For a C-corporation shareholder: GILTI of $980,000, §250 deduction of $490,000 (50%), taxable GILTI = $490,000, tax at 21% = $102,900, less 80% of foreign taxes paid.
For an individual shareholder without §962 election: $980,000 included as ordinary income, taxed at up to 37% = $362,600 - with no §250 deduction and limited foreign tax credit availability. The §962 election could reduce this substantially.