The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.
The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and global
levels. We are a 501(c)(3) nonprofit
©2021 Tax Foundation
Creative Commons CC-BY-NC 4.0
Editor, Rachel Shuster
Designer, Dan Carvajal
1325 G Street, NW, Suite 950
Washington, DC 20005
Biden Administration Changes to
GILTI and FDII Will Yield Automatic
State Tax Increases
• Twenty states and the District of Columbia tax some portion of Global
Intangible Low-Taxed Income (GILTI), although only 16 of those states have
issued guidance on the matter more than three years after the federal law
went into effect.
• States that have not yet issued guidance on their treatment of GILTI should
act quickly to provide clarity to taxpayers, and states that currently tax GILTI
should exclude it from their tax base.
• As part of the American Jobs Plan Act, President Joe Biden has proposed
several major changes to GILTI, including reducing the value of the § 250
deduction, eliminating the 10 percent exemption for deemed returns to
qualified business asset investment (QBAI), and taxing GILTI on a country-by-
If the proposed federal changes to GILTI are adopted, more U.S. companies
will be exposed to taxes on GILTI, and more income will be taxed as GILTI by
the federal government and by states.
• Several states have legislation pending this year that would change their
tax treatment of GILTI. In California, Illinois, and Minnesota, proposals are
circulating to tax GILTI for the first time, while a Massachusetts bill would tax
GILTI to a much greater degree. Alabama, Iowa, and Kansas exempted GILTI
from taxation over the past year, while Nebraska policymakers considered but
did not adopt such legislation.
• Twenty-two states conform to the federal deduction for Foreign-Derived