No Tax Breaks for Outsourcing Act

This section significantly alters the taxation of Global Intangible Low-Taxed Income (GILTI). It repeals the 10% deemed return on qualified business asset investment (QBAI), meaning all net CFC tested income would be immediately included in a U.S. shareholder's gross income. It also repeals the 50% deduction for GILTI (Section 250), effectively taxing GILTI at the full corporate rate. Furthermore, it increases the deemed paid foreign tax credit for GILTI from 80% to 100% and applies GILTI calculations on a country-by-country basis. It also repeals the high-tax exclusion for foreign base company income and insurance income and eliminates the carryback of foreign tax credits. Finally, it treats foreign base company oil-related income as Subpart F income.

This section mandates that the foreign tax credit (FTC) limitation be applied separately for each country where a U.S. taxpayer or its foreign subsidiaries (CFCs) have a "taxable unit." A "taxable unit" can be the taxpayer itself, a foreign corporation, an interest in a pass-through entity, or a branch. This prevents companies from averaging high foreign taxes paid in one country with low foreign taxes paid in another to maximize their U.S. foreign tax credits. It also treats U.S. possessions as separate countries for this purpose.

This section limits the interest deduction for U.S. domestic corporations that are part of an "international financial reporting group" (a multinational group with consolidated financial statements and over $100 million in average gross receipts). The deduction is capped based on an "allowable percentage" derived from the corporation's share of the group's global reported net interest expense, relative to its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This aims to prevent multinational groups from disproportionately allocating interest expense to their U.S. entities to reduce U.S. taxable income. Disallowed interest can be carried forward for five years.

This section significantly strengthens the rules designed to prevent corporate inversions (where a U.S. company reincorporates abroad to reduce its U.S. tax burden while maintaining U.S. operations). It lowers the ownership threshold for a foreign corporation to be treated as a domestic corporation from 80% to 60% if former U.S. shareholders retain that much ownership. Crucially, it introduces a new "inverted domestic corporation" definition: if, after an acquisition of a U.S. entity, more than 50% of the foreign entity's stock is held by former U.S. shareholders, OR if the management and control of the expanded affiliated group is primarily in the U.S. AND the group has significant domestic business activities (at least 25% of employees, compensation, assets, or income in the U.S.), then the foreign corporation is treated as domestic. It also applies retroactively to taxable years ending after December 22, 2017.

This section introduces a new rule treating certain foreign corporations as domestic corporations solely for income tax purposes if their "management and control" occurs primarily within the United States. This applies to corporations whose stock is regularly traded on an established securities market or whose aggregate gross assets are $50 million or more. Management and control is considered primarily in the U.S. if substantially all executive officers and senior management making strategic, financial, and operational decisions are located primarily in the U.S. For corporations primarily holding investment assets, management and control is in the U.S. if investment decisions are made in the U.S. This provision has an effective date two years after enactment.