Rep. Ron Estes has introduced legislation proposing changes to US international tax rules, including narrowing BEAT, expanding foreign tax credit relief, increasing the FDDEI deduction, and encouraging the repatriation of intellectual property.
Rep. Ron Estes of Kansas introduced the U.S. Innovation and Global Competitiveness Act of 2026 on 17 September 2026. The bill aims to modify how the US taxes multinational companies while maintaining anti-profit-shifting measures.
The proposal builds on rules established by the 2017 Tax Cuts and Jobs Act and its successor legislation, the Working Families Tax Cuts. Estes framed the bill as a way to keep American businesses competitive globally without imposing double taxation.
Background and legislative context
The 2017 Tax Cuts and Jobs Act introduced the base erosion and anti-abuse tax (BEAT), along with provisions on global intangible low-taxed income and foreign-derived intangible income. The Working Families Tax Cuts made BEAT permanent and updated the other provisions, now called net controlled foreign corporation tested income (NCTI) and foreign-derived deduction eligible income (FDDEI).
Estes stated that the current system should support American job creation rather than penalise companies for operating internationally. The legislator noted that aerospace and other sectors in Kansas compete in global markets and benefit from clearer international tax rules.
Narrowed anti-abuse rules
The bill limits when the base erosion and anti-abuse tax (BEAT) applies to overseas payments. It introduces a high-tax exception that excludes payments to related foreign companies taxed at an effective rate of at least 18.9% (equivalent to 90% of the US corporate rate). Countries with digital services taxes or discriminatory levies against American companies would remain outside this exception.
The legislation also permits general business credits to offset BEAT liability and prevents domestic tax credits from increasing a company’s total BEAT bill.
Foreign tax credit adjustments
Estes’ bill eliminates a 10% reduction in foreign tax credits related to net controlled foreign corporation tested income (NCTI). It allows companies to carry forward NCTI losses for up to five years and treat foreign tax credits like other business credits for carryback and carryforward purposes.
The bill reduces foreign tax credit categories from four to two and grants the Treasury Department additional discretion in foreign tax redeterminations.
Deduction increases and IP provisions
The foreign-derived deduction eligible income (FDDEI) deduction would increase from 33.34% to 40%. The bill removes the taxable income limit that currently constrains this deduction and adds a look-through rule for certain interest payments from foreign subsidiaries.
A temporary provision allows US companies to transfer intellectual property held by foreign subsidiaries back to the United States without incurring additional tax.
Estes described the bill as the opening proposal in a broader effort to reshape international tax policy. He plans to gather feedback through the remainder of 2026 and into the 120th Congress.
