SEC. 70321. Modification of deduction for foreign-derived deduction eligible income and net CFC tested income.
(a) In general.—Section 250(a) is amended—
(1) by striking “37.5 percent” in paragraph (1)(A) and inserting “33.34 percent”,
(2) by striking “50 percent” in paragraph (1)(B) and inserting “40 percent”, and
(3) by striking paragraph (3).
(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.
SEC. 70322. Determination of deduction eligible income.
(a) Sales or other dispositions of certain property.—
(1) IN GENERAL.—Section 250(b)(3)(A)(i) is amended—
(A) by striking “and” at the end of subclause (V),
(B) by striking “over” at the end of subclause (VI) and inserting “and”, and
(C) by adding at the end the following new subclause:
“(VII) except as otherwise provided by the Secretary, any income and gain from the sale or other disposition (including pursuant to the deemed sale or other deemed disposition or a transaction subject to section 367(d)) of—
“(aa) intangible property (as defined in section 367(d)(4)), and
“(bb) any other property of a type that is subject to depreciation, amortization, or depletion by the seller, over”.
(2) CONFORMING AMENDMENT.—Section 250(b)(5)(E) is amended by inserting “(other than paragraph (3)(A)(i)(VII))” after “For purposes of this subsection”.
(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to sales or other dispositions (including pursuant to deemed sales or other deemed dispositions or a transaction subject to section 367(d) of the Internal Revenue Code of 1986) occurring after June 16, 2025.
(b) Expense apportionment limited to properly allocable expenses.—
(1) IN GENERAL.—Section 250(b)(3)(A)(ii) is amended to read as follows:
“(ii) expenses and deductions (including taxes), other than interest expense and research or experimental expenditures, properly allocable to such gross income.”.
(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to taxable years beginning after December 31, 2025.
SEC. 70323. Rules related to deemed intangible income.
(a) Taxation of net CFC tested income.—
(1) IN GENERAL.—Section 951A(a) is amended by striking “global intangible low-taxed income” and inserting “net CFC tested income”.
(2) REPEAL OF TAX-FREE DEEMED RETURN ON FOREIGN INVESTMENTS.—Section 951A, as amended by the preceding provisions of this Act, is amended by striking subsections (b) and (d) and by redesignating subsections (c), (e), and (f) as subsections (b), (c), and (d), respectively.
(3) CONFORMING AMENDMENTS.—
(A) (i) Section 250 is amended by striking “global intangible low-taxed income” each place it appears in subsections (a)(1)(B)(i), (a)(2), and (b)(3)(A)(i)(II) and inserting “net CFC tested income”.
(ii) The heading for section 250 of such Code is amended by striking “Global Intangible Low-Taxed Income” and inserting “Net CFC Tested Income”.
(iii) The item relating to section 250 in the table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking “global intangible low-taxed income” and inserting “net CFC tested income”.
(B) Section 951A(c)(1), as redesignated by paragraph (2), is amended by striking “subsections (b), (c)(1)(A), and (c)(1)(B)” and inserting “subsections (b)(1)(A) and (b)(1)(B)”.
(C) Section 951A(d), as redesignated by paragraph (2), is amended—
(i) by striking “global intangible low-taxed income” each place it appears and inserting “net CFC tested income”, and
(ii) by striking “subsection (c)(1)(A)” in paragraph (2)(B)(ii) and inserting “subsection (b)(1)(A)”.
(D) Section 960(d)(2) is amended—
(i) by striking “global intangible low-taxed income” in subparagraph (A) and inserting “net CFC tested income”, and
(ii) by striking “section 951A(c)(1)(A)” in subparagraph (B) and inserting “section 951A(b)(1)(A)”.
(E) (i) The heading for section 951A is amended by striking “Global Intangible Low-Taxed Income” and inserting “Net CFC Tested Income”.
(ii) The item relating to section 951A in the table of sections for subpart F of part III of subchapter N of chapter 1 is amended by striking “Global intangible low-taxed income” and inserting “Net CFC tested income”.
(b) Deduction for foreign-derived deduction eligible income.—
(1) IN GENERAL.—Section 250(a)(1)(A) is amended by striking “foreign-derived intangible income” and inserting “foreign-derived deduction eligible income”.
(2) CONFORMING AMENDMENTS.—
(A) Section 250(a)(2) is amended by striking “foreign-derived intangible income” each place it appears and inserting “foreign-derived deduction eligible income”.
(B) Section 250(b), as amended by subsection (a), is amended—
(i) by striking paragraphs (1) and (2),
(ii) by redesignating paragraphs (4) and (5) as paragraphs (1) and (2), respectively, and by moving such paragraphs before paragraph (3),
(iii) in paragraph (2)(B)(ii), as so redesignated, by striking “paragraph (4)(B)” and inserting “paragraph (1)(B)”, and
(iv) by striking “intangible” in the heading thereof and inserting “deduction eligible”.
(C) (i) The heading for section 250 is amended by striking “intangible” in the heading thereof and inserting “deduction eligible”.
(ii) The heading for section 172(d)(9) is amended by striking “intangible” and inserting “deduction eligible”.
(iii) The item relating to section 250 in the table of sections for part VIII of subchapter B of chapter 1 is amended by striking “intangible” and inserting “deduction eligible”.
(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.