GILTI and FDDEI Fundamentals (Formerly FDII)

Summary

This practice note explains the fundamentals of the global intangible low-taxed income (GILTI) tax regime and the FDII regime, which was renamed foreign-derived deduction eligible income (FDDEI) under the One Big Beautiful Bill Act (OBBBA), Pub. L. No. 119-21, 139 Stat. 72 (July 4, 2025). Both GILTI and FDII were introduced by the Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, § 14201, 131 Stat. 2054, 2208–15 (2017), and were substantially revised by OBBBA. Effective for taxable years beginning after December 31, 2025, OBBBA restructured the GILTI regime to apply on a jurisdiction-by-jurisdiction basis and modified the FDII regime by eliminating the QBAI offset, renaming the deduction base as FDDEI, and fixing the deduction percentage. See Pub. L. No. 119-21, §§ 70321(a)(1), 70322(a)(1)–(3) (2025). Treasury and the IRS have also issued interim guidance under OBBBA for transition years, including Notice 2025-75 (transition rule for dividends in OBBBA § 70354(c)(2) modifying the ...