Own a Foreign Company? 5 OBBBA Tax Changes Every Ohio Expat Must Know for 2026

For American expatriates from Ohio and across the U.S., the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, has significantly changed the tax landscape for owners of foreign corporations. These new rules, most taking effect for tax years beginning after December 31, 2025, will fundamentally alter how a Controlled Foreign Corporation (CFC) is defined and how its income is taxed by the IRS.

If you're an US expat with Ohio or another US state residency ties or business connections, understanding these complex international tax provisions is crucial for compliance and strategic planning. Here are the five biggest OBBBA changes that U.S. expats with foreign business interests cannot ignore.

American Expats with Controlled Foreign Corporation

1. The "Accidental CFC" Rule Is Reversed: A Big Win for Expats

In a major reversal of the 2017 Tax Cuts and Jobs Act (TCJA), the OBBBA restores the pre-TCJA rule that prevents stock owned by a foreign person (like a foreign parent company) from being attributed "downward" to a U.S. person.

• What this means for Ohio Expats: This is a significant benefit that eliminates many "accidental CFC" situations, a common headache for expats working in foreign-parented companies. If your CFC status was triggered by this rule after 2017, it's time for an immediate review. This change could simplify your U.S. tax filings and reduce your compliance burden.

2. Your Foreign Tax Credits Will Be Calculated Differently

The OBBBA makes two key changes to the Foreign Tax Credit (FTC) calculation for income from your CFC:

• More Favorable FTC Limitation: A new rule helps preserve more of your foreign-source income when calculating your FTC limitation, which can increase the amount of foreign taxes you can credit against your U.S. tax bill.

• Increased "Deemed-Paid" Credit: The credit for foreign taxes paid by your CFC on its GILTI earnings (now called "net CFC tested income") has increased from 80% to 90%. However, a new 10% "haircut" now disallows a portion of the credit on certain distributions made after June 28, 2025.

• What it means: While your potential for claiming credits is higher, the timing of dividends from your CFC is now more critical than ever to avoid the new 10% disallowance. Strategic planning is key.

3. Key Rules for Corporate Structuring Are Now Permanent

To provide more certainty for international business planning, the OBBBA made one rule permanent and eliminated a popular deferral option:

• The "Look-Through" Rule is Permanent: The rule that prevents certain payments (like interest and royalties) between your related CFCs from being treated as taxable Subpart F income is now a permanent part of the tax code.

• The One-Month Tax Year Deferral is Repealed: Foreign corporations can no longer elect a tax year that ends one month after their U.S. owner's year-end.

• What it means: You now have permanent certainty for structuring intercompany payments but less flexibility for timing your annual income inclusions.

4. New Rules Target Certain Foreign-Controlled Companies (FCUS/FCFC)

The law creates a new category of taxpayer called the "Foreign-Controlled U.S. Shareholder" (FCUS) and a new type of entity, the "Foreign-Controlled Foreign Corporation" (FCFC). These rules primarily target U.S. subsidiaries of foreign parent companies and may subject them to the same anti-deferral taxes (Subpart F and GILTI) as traditional CFCs.

• What it means: While the downward attribution reversal helps many expats, these new rules create a parallel regime. If your business structure involves U.S. companies owned by foreign entities that in turn own other foreign affiliates, you must reassess your exposure to these U.S. taxes.

5. Income Inclusion and Pro-Rata Share Rules Are Clarified

The law clarifies exactly when and how U.S. shareholders must include their share of a CFC's taxable income. You now have a Subpart F income inclusion if your company was a CFC for even one day during the year, and you owned stock on any of those days.

• What it means: This change resolves prior ambiguities but requires precise, year-round tracking of ownership periods to ensure you are calculating your U.S. income inclusion correctly.

OBBBA Tax Changes for Ohio Expats: Specific Impacts and Next Steps

For American expats who maintain residency or business ties to Ohio, these federal changes have unique implications. Understanding the OBBBA tax changes for Ohio expats is critical because Ohio's tax system generally starts with federal adjusted gross income (AGI). While Ohio does not have a separate tax on GILTI or Subpart F income, any distributions from your CFC that are included in your federal AGI (like dividends) will flow through to your Ohio state tax return.

Furthermore, the reversal of the downward attribution rule may simplify not just your federal Form 5471 filings, but also reduce the complexity that could indirectly affect your state-level compliance, especially if you operate a pass-through entity with connections back to Ohio. Consulting with a tax professional familiar with both Ohio expat tax rules and the new OBBBA CFC provisions is essential.

OBBBA Tax Changes for Ohio Expats: Specific Impacts and Next Steps

The OBBBA's international tax changes are complex. We strongly recommend a professional review of your foreign corporate structure in light of these new laws. Contact our firm today to schedule a consultation to discuss how the OBBBA impacts your specific US tax situation.

Whin Global Expat Tax Profesionnals are here to help.