The No Tax Breaks for Outsourcing Act amends the Internal Revenue Code to eliminate tax incentives for offshoring by reforming international corporate taxation, tightening interest deduction rules, and closing loopholes used by inverted and foreign-managed corporations.
Lloyd Doggett
Representative
TX-37
The **No Tax Breaks for Outsourcing Act** amends the Internal Revenue Code to discourage corporations from shifting profits and operations overseas. The bill replaces the current global intangible low-taxed income (GILTI) regime with a "net CFC tested income" system, implements country-by-country tax reporting, and limits interest deductions for large international groups. Additionally, it strengthens rules to prevent corporate inversions and treats foreign corporations managed within the United States as domestic entities for tax purposes.
No Tax Breaks for Outsourcing Act: New Rules to Tax Foreign Profits and Limit Interest Deductions Starting in 2025
This bill fundamentally rewrites the rules for how American companies pay taxes on their overseas operations. Starting in 2025, it scraps the current 'global intangible low-taxed income' (GILTI) system and replaces it with a 'net CFC tested income' framework. Under Section 2, this means U.S. shareholders can no longer subtract a 'deemed return' on physical assets—like factories or equipment—before calculating their tax bill. Instead, they’ll have to include the full net income from their foreign corporations in their current taxable income. The bill also kills the Section 250 deduction, which previously gave companies a discount on income earned from foreign markets, meaning that money will now be taxed at the standard corporate rate.
The End of Global Blending
One of the biggest shifts is how companies calculate their foreign tax credits. Currently, a company might use high taxes paid in one country to offset low taxes in another. Section 3 puts a stop to that by requiring a country-by-country calculation. For example, if a U.S. software company has a branch in Ireland and a subsidiary in Germany, it must now calculate its taxes and credits for each location separately. This prevents 'blending' and ensures that if a company is making money in a tax haven, it can't hide that profit behind taxes paid in a high-tax jurisdiction. While this aims to stop tax dodging, it adds a massive layer of paperwork for any business operating in multiple countries.
Capping the Interest Tab
For large international groups—those bringing in over $100 million in average annual gross receipts—Section 4 introduces a strict cap on interest deductions. If you’re a domestic corporation that’s part of a global reporting group, your ability to deduct interest paid on debt will be limited to your interest income plus a slice of the group’s overall interest expense (capped at 110% of net interest). This is designed to prevent 'earnings stripping,' where companies load up their U.S. branches with debt to lower their domestic tax bill. For a construction firm or a tech startup relying on heavy borrowing to scale, this could significantly increase the cost of doing business.
Redefining 'American' Companies
The bill also gets tough on 'inversions'—when a company moves its legal headquarters abroad to save on taxes. Under Section 5, if a foreign corporation is managed and controlled primarily within the U.S. (meaning the people making the big strategic and financial decisions are based here), it will be treated as a domestic U.S. corporation for tax purposes. Section 6 extends this to any foreign company that is regularly traded on a stock market or has over $50 million in assets if its 'mind and management' stay in the States. While this aims to keep companies from fleeing the U.S. tax system, the vague definition of 'management and control' gives the Treasury Secretary broad power to decide who counts as a domestic taxpayer, which could lead to messy legal battles for businesses with global leadership teams.