United States Replaced GILTI with NCTI Tax Regime
The new NCTI rules took effect for tax years beginning after December 31, 2025, altering key deduction and credit rates.
Updated on Sept. 28, 2026 in Taxes
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The United States transitioned from the Global Intangible Low-Taxed Income regime to the Net CFC Tested Income system for tax years beginning after December 31, 2025. This change mandates updated calculations for tax obligations based on foreign income and ownership structures.
Why it matters
Taxpayers may see significant shifts in their U.S. tax liability for the 2026 tax year under these updated regulatory requirements. The transition replaces established GILTI frameworks with new standards for tangible asset returns and deductions.
The Section 250 deduction was reduced from 50% to 40%, while the deemed-paid foreign tax credit percentage rose from 80% to 90%. Additionally, the QBAI-based tangible asset return was entirely eliminated under the new NCTI rules.
The players
United States
The United States is the national jurisdiction currently implementing these significant changes to international tax compliance frameworks.
The details
Under the NCTI regime, taxpayers must calculate their U.S. tax obligations by analyzing foreign tax rates, income, and their specific ownership structure. While 2025 tax returns filed in 2026 remained subject to GILTI rules, the new framework now governs all tax years starting after the end of 2025.
Timeline
The GILTI tax regime application officially ended on December 31, 2025.
The new NCTI rules apply to the 2026 tax year.
This information was published on September 28, 2026.
Market Dynamics
This transition marks a formal departure from the Global Intangible Low-Taxed Income (GILTI) regime that previously served as the primary framework for taxing foreign income. These shifts mirror broader efforts by the United States to restructure international tax standards and credit calculations.
Taxpayers should review their 2026 ownership structures to account for the reduction in Section 250 deductions. Investors might also consider the potential use of a Section 962 election to navigate their adjusted U.S. tax liability under the new regulations.
The takeaway
The move to NCTI requires a thorough re-evaluation of foreign tax credit strategies and tangible asset calculations for the current fiscal year. Consulting with a qualified professional is recommended to manage the implications of the reduced Section 250 deduction.
Further reading
For additional context on regulatory updates, visit the Taxes section.
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