Net CFC tested income (NCTI)

NCTI took the place of global intangible low-taxed income (GILTI) for tax years beginning after December 31, 2025. Public Law 119-21, enacted July 4, 2025, made the change. Each US shareholder of a CFC includes NCTI in income every year, even if the CFC pays out nothing.

Tested income is a CFC’s gross income, minus the deductions that go with it, including taxes. It leaves out subpart F income, which is taxed under its own rule. It also leaves out a few other items, such as high-taxed income and dividends from related companies. Until 2025, a 10% return on the CFC’s tangible assets, such as equipment, was exempt. That exemption is repealed from 2026, so all tested income counts.

Without a Section 962 election, an individual US shareholder includes NCTI at ordinary rates. There is no deduction, and no credit for the CFC’s foreign tax. The regulations let an electing individual take the Section 250 deduction as well. When those earnings are paid out later, only the part of the dividend above the US tax already paid is taxed.

Under GILTI, the old 50% deduction gave a 10.5% rate. The 13.125% once scheduled for 2026 was repealed before it began. IRS forms lag the law: Form 8992, which figures the inclusion, still carries the GILTI title on IRS.gov.