Practice Brief: Pillar Two SBIE & NCTI Under OBBBA
Bottom line (1 sentence): OBBBA repealed the QBAI tangible-asset exclusion for tax years beginning after December 31, 2025, decoupling U.S. NCTI from Pillar Two SBIE mechanics and requiring separate contemporaneous documentation for each regime.
🔴 Action Required
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Verify revised IRC § 250 deduction percentages and § 960(d) FTC haircut percentages for NCTI against the statute as amended by OBBBA (P.L. 119-21, enacted July 4, 2025) before filing 2026 returns—the pre-OBBBA 50%/37.5% framework is obsolete. — OBBBA, P.L. 119-21
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Prepare separate contemporaneous documentation for § 482 compliance (ten principal documents per Treas. Reg. § 1.6662-6(d)(2)(iii)(B), due by tax return due date including extensions) and Pillar Two SBIE substantiation (jurisdiction-specific tangible asset registers and payroll records for GIR filing)—do not cross-reference or consolidate. — Treas. Reg. § 1.6662-6(d)(2)(iii); GloBE Model Rules Art. 5.3
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Verify applicable SBIE carve-out percentages for your filing year directly against GloBE Model Rules Art. 9.1 and OECD Administrative Guidance (most recent: June 17, 2024)—transitional rates phase down over time. — GloBE Model Rules Art. 9.1; OECD Admin Guidance Jun 2024
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Ensure Form 5471 Schedule M disclosures for Irish and Singapore CFCs align with amounts and characterizations in § 482 principal documents to avoid IRS scrutiny; file by U.S. parent's return due date. — IRC § 6038(a); Form 5471 instructions
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Segregate related-party royalties (Subpart F FPHCI under IRC § 954(c)(1)(A), no § 250 deduction) from active business income (NCTI, subject to revised § 250 deduction) for accurate classification on Form 5471. — IRC § 954(c)(1)(A); IRC § 951A as amended by OBBBA
🟡 Monitor
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U.S. IIR legislative proposals—if the U.S. does not enact an IIR, other jurisdictions may impose UTPR on the U.S. parent's income if Irish or Singapore subsidiaries are undertaxed (ETR < 15%). — GloBE Model Rules Art. 2.2, Art. 2.3
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QDMTT creditability guidance from Treasury—Notice 2023-80 (issued December 22, 2023) reserved on whether QDMTT qualifies as a creditable foreign tax under IRC § 901; do not assume creditability without final regulations. — Notice 2023-80
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OECD Administrative Guidance updates published after June 17, 2024, for GIR filing requirements, DTL recapture rules, and cross-border allocation refinements. — OECD Admin Guidance Jun 2024
🟢 FYI (Specialty Practices)
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OFAC published Venezuela Sanctions GLs 48A, 49A, 5U, and 5V on June 10, 2026. — For MNE groups with Venezuelan operations | Document Nos. 2026-11616, 2026-11615
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OFAC published ICC-Related Sanctions GL 11 on June 10,