Author David Zaiken, CPA  •  Published September 28, 2026, 2026  •  WebsterRogers LLP

What Businesses Should Know

A bill introduced in Congress, the U.S. Innovation & Global Competitiveness Act, would reshape international tax rules for companies with foreign subsidiaries, cross-border transactions, or intellectual property held overseas. Introduced Sept. 16, 2026, by U.S. Rep. Ron Estes of Kansas, the proposal is not yet law, but it signals meaningful changes worth watching for foreign tax credits, IP strategies, supply chain strategies, intellectual property planning, and the base erosion tax.

Key Takeaways

• The U.S. Innovation & Global Competitiveness Act, introduced Sept. 16, 2026, would revise foreign tax credit rules, Net Controlled Foreign Corporations Tested Income (NCTI) Base Erosion and Anti-Abuse Tax (BEAT).
• Proposed changes would ease foreign tax credit limits on NCTI and reduce foreign tax credit categories from four to two.
• The Foreign-Derived Intangible Income (FDDEI) deduction would rise to 40% from 33.34%, and companies could temporarily bring offshore intellectual property back to the U.S. without additional tax.
• A new high-tax exemption would exclude payments taxed abroad at 18.9% or more from BEAT, with exceptions for countries that impose discriminatory digital taxes.
• The bill is not yet law; if enacted, most provisions would apply to tax years beginning after Dec. 31, 2026.

How Would the Proposal Change Foreign Tax Credits?

For companies paying taxes in other countries, the proposed changes to foreign tax credits could be significant. The legislation seeks to balance anti-profit-shifting rules with the competitiveness of U.S. multinational companies through NCTI.

• Eliminates the 10% foreign tax credit reduction for NCTI.
• Allows NCTI foreign tax credits to follow ordinary carryback and carryforward rules, like other business credits.
• Reduces the number of foreign tax credit categories from four to two.

These proposed changes could affect how multinational companies approach international expansion and investment.

How would the Proposal Change NCTI?

• Allows full foreign tax credit instead of 90%
• Tested Losses can be carried forward

Could U.S. Intellectual Property Become More Attractive?

The proposal would also modify FDDEI to strengthen incentives for companies to maintain intellectual property and other assets in the United States.

• Allows export-related tax benefits from loss years to carry forward into profitable years.
• Increases the FDDEI deduction percentage to 40% from 33.34%.
• Creates a temporary path for U.S. companies to bring existing controlled foreign corporation intellectual property back to the U.S. without additional tax.
• Encourages more deductible payments from abroad to the U.S., which would lower foreign taxes and increase U.S. primary taxing rights.

For companies that hold intellectual property offshore, this provision warrants particular attention. The proposed rules include specific requirements and time limits, so companies should understand the potential implications before deciding where to hold intellectual property.

What Changes Does the Act Propose to the Base Erosion Tax?

Lastly, the proposal would reform the BEAT. Estes argues that while BEAT has deterred aggressive base-erosion strategies, it can also capture ordinary business payments to foreign related parties that are not necessarily intended to avoid U.S. tax. The proposed changes would exempt payments already subject to U.S. tax and target “worst of the worst” tax schemes.

“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,” Estes said in a statement.

The proposal also calls for a high-tax exemption for certain foreign payments. Payments subject to a foreign tax rate of at least 18.9% generally would no longer be treated as base-erosion payments. The exemption would not apply to countries that impose digital services taxes or other discriminatory taxes on U.S. companies.

This bill and others mark the possible beginning of legislation as the midterm elections approach.

Frequently Asked Questions

What Types of Businesses Could Be Most Affected by the Proposed Changes?

Companies with foreign subsidiaries, cross-border related-party payments, foreign tax credits, or intellectual property held overseas could see significant changes to their tax planning.

Could the Proposed Changes Affect Where a Company Keeps Its Intellectual Property?

Yes. The proposal would increase certain tax benefits for income generated from U.S.-based intellectual property and create a temporary opportunity for some companies to move intellectual property from foreign operations back to the United States. Companies with intellectual property held overseas should evaluate their options before making structural changes.

When Would the New Rules Take Effect?

The Act is not yet law. If enacted as introduced, most provisions would apply to tax years beginning after Dec. 31, 2026. Rep. Estes has said he intends to keep developing the proposal based on feedback through the rest of the year and into the 120th Congress, so the timeline and details could still change.

What Should Companies Do Now to Prepare?

Model the potential tax differences under the current rules and the proposed changes. Reviewing foreign structures, related-party payments, foreign tax credits, and planned international transactions can help identify opportunities and risks before making important decisions.

How Would the Proposal Change the Base Erosion Tax (BEAT)?

The bill would exempt payments already subject to U.S. tax from BEAT and add a high-tax exemption for foreign payments taxed at 18.9% or more, while still targeting the most aggressive base-erosion strategies. The exemption would not apply to countries with digital services taxes or other discriminatory taxes on U.S. companies.

Plan Ahead — Evaluate Your Options

International business leaders should monitor the proposal’s progress and assess how it could interact with tariffs, trade, supply chains, and cross-border tax planning. Two questions are worth asking early:

1. How do the provisions apply to your company, and what alternatives emerge?
2. What differences would result between 2026 and 2027 if the bill advances?

Reviewing foreign structures, related-party payments, foreign tax credit positions, intellectual property ownership, and anticipated international transactions now can help identify potential opportunities and risks. The legislation is in flux, as Rep. Estes intends to continue developing the proposals based on feedback through the rest of the year and into the 120th Congress.

If you’re considering a significant financial move, or want to discuss the potential impacts of the Estes proposal, talk with your WebsterRogers international tax advisor team while there is still time to evaluate your options.

For more information, contact David Zaiken, Tax Director of Consulting.

About WebsterRogers

WebsterRogers LLP is a South Carolina-based accounting and consulting firm founded in 1984. The firm has seven offices across the state and more than 140 professionals who serve industries such as manufacturing, high tech, tourism and hospitality, construction, and  healthcare