TL;DR: A minimum tax on profits that US owners earn through their foreign subsidiaries — charged every year, whether or not any cash comes home.

If you own 10%+ of a CFC (a US-controlled foreign company), the US doesn't wait for you to bring the profits home. Each year you include your share of the CFC's ordinary business profit in income. From 2018 to 2025 this was called GILTI. The 2025 tax law renamed it net CFC tested income — pronounced “necktie” — for tax years starting in 2026, and changed the maths.

For a US corporation: a 40% deduction (down from 50%) means an effective rate of about 12.6%; foreign taxes are credited at 90% (up from 80%); and the old carve-out for a return on tangible assets is gone. Rule of thumb: if the foreign country taxes the profit at roughly 14% or more, NCTI usually adds little or nothing. Individuals are hit harder unless they make a Section 962 election.

NCTI for a US corporate ownerA CFC earning $100 that pays 14% foreign tax: the US includes $100, deducts 40%, taxes $60 at 21% for $12.60, then credits 90% of $14, leaving roughly zero.CFC in Irelandearns $100 · pays $14US parent corpincludes $100 nowevery year$100NCTI included$100.00less 40% deduction− $40.00× 21% = US tax$12.60less 90% × $14 foreign tax− $12.60Extra US tax≈ $0Simplified: ignores the §78 gross-up and expense allocation.
Taxed abroad at about 14%? NCTI mostly shrugs. Taxed at 5%? It bites.

Worked example

Same CFC, but it's in a low-tax country and pays only $5 of foreign tax. US tax before credits is still $12.60; the credit is 90% × $5 = $4.50; the US parent owes about $8.10 extra — on cash it may never have received.

Where you'll see it: Fund structuring for foreign portfolio companies, Form 8992, and K-3 Part sections on CFC inclusions for US LPs with 10%+ indirect stakes.

Code: IRC §§ 951A, 250, 960(d) (as amended by Pub. L. 119-21, 2025) · Related: CFC, FDDEI, PFIC, Schedule K-1 (and K-3)

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This glossary is general information, simplified for learning. It is not tax, legal or investment advice, and real structures turn on facts and documents not shown here.