Modifications to base erosion minimum tax

(a) Base erosion minimum tax amount determined without regard to credits (1) In general Section 59A(b)(1)(B) is amended to read as follows: (B) an amount equal to the regular tax liability (as defined in section 26(b)) of the taxpayer for the taxable year.. (2) Conforming amendment Section 59A(b) is amended by striking paragraph (4). (b) Application of general business credit against beat The second sentence of section 38(c)(1) is amended by striking and the tax imposed by section 55 and inserting, the tax imposed by section 55, and the tax imposed by section 59A. (c) Elimination of modifications for taxable years after 2025 (1) In general Section 59A(b) is amended by striking paragraph (2) and redesignating paragraph (3) as paragraph (2). (2) Conforming amendments (A) Section 59A(b)(1) is amended by striking paragraphs (2) and (3) and inserting paragraph (2). (B) Paragraph (2) of section 59A(b), as redesignated by paragraph (1), is amended by striking under paragraphs (1)(A) and (2)(A) shall each be increased and inserting under paragraph (1)(A) shall be increased. (C) Section 59A(e)(1)(C) is amended by striking subsection (b)(3)(B) and inserting subsection (b)(2)(B). (d) Expansion and consolidation of rules To exempt certain payments from treatment as base erosion payments (1) In general Section 59A is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection: (i) Certain payments not treated as base erosion payments (1) Exception for payments on which tax is imposed (A) In general An amount shall not be treated as a base erosion payment if tax is (or was at the time of payment or accrual) imposed by this chapter with respect to such amount (other than by this section). (B) Treatment of certain deductions For purposes of subparagraph (A), tax shall be treated as imposed by this chapter without regard to any deduction allowed under part VIII of subchapter B. (C) Application of certain rules The amount not treated as a base erosion payment by reason of this paragraph shall be determined under rules similar to the rules of section 163(j)(5) (as in effect before the date of the enactment of Public Law 115–97). (2) Exception for certain payments subject to sufficient foreign tax (A) In general An amount shall not be treated as a base erosion payment if the taxpayer establishes to the satisfaction of the Secretary that such amount was made to a foreign person which is a related party of the taxpayer that is subject to an effective rate of foreign income tax (as defined in section 904(d)(2)(F)) which is not less than 18.9 percent. (B) Certain payments to related parties To the extent provided by the Secretary in regulations, an amount paid to a foreign person which is a related party of the taxpayer shall be treated as paid to another foreign person which is a related party of the taxpayer if such second foreign person is subject to an effective rate of foreign income tax (as defined in section 904(d)(2)(F)) which is less than 18.9 percent, to the extent the amount so paid directly or indirectly funds a payment to such second foreign person. (C) Determination on basis of applicable financial statements Except as otherwise provided by the Secretary under subparagraph (D), the effective rate of foreign income tax with respect to any amount may be established on the basis of applicable financial statements (as defined in section 451(b)(3)). (D) Regulations The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance providing procedures for determining the effective rate of foreign income tax to which any amount is subject. Such procedures may require that any transaction or series of transactions among multiple parties be recharacterized as one or more transactions directly among any 2 or more of such parties where the Secretary determines that such recharacterization is appropriate to carry out, or prevent avoidance of, the purposes of this section. (3) Exception for certain amounts with respect to services Subsections (d)(1) and (d)(2) shall not apply to so much of any amount paid or accrued by a taxpayer for services as does not exceed the total services cost of such services. The preceding sentence shall not apply unless such services meet the requirements for eligibility for use of the services cost method under section 482 (determined without regard to the requirement that the services not contribute significantly to fundamental risks of business success or failure).. (2) Conforming amendment Section 59A(d) is amended by striking paragraph (5). (e) Other modifications (1) Section 59A(b)(3)(B)(ii) is amended by striking registered securities dealer and inserting securities dealer registered. (2) Section 59A(h)(2)(B) is amended by striking section 6038B(b)(2) and inserting section 6038A(b)(2). (3) Section 59A(j)(2), as redesignated by subsection (c), is amended by striking subsection (g)(3) and inserting subsection (h)(3). (f) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025.