As of January 1, 2026, GILTI no longer exists. The One Big Beautiful Bill Act (OBBBA) replaced it with Net CFC Tested Income (NCTI) — and for US citizens and green card holders who own a Canadian corporation, the new regime is not just a rename. The effective US tax rate on retained corporate earnings rose from 10.5% to 12.6% for those using the Section 962 election, the 10% tangible-asset carve-out (QBAI) was eliminated entirely, and the foreign tax credit haircut improved from 80% to 90%. Net effect: more income is caught by the regime, taxed at a higher rate, but with better credit for Canadian corporate tax already paid. Whether you come out ahead or behind depends on your corporation''s structure — and for owners of Canadian-controlled private corporations (CCPCs) paying the small business rate, the answer is usually behind.
Key Takeaways
- GILTI became NCTI for tax years beginning after December 31, 2025 — same Form 8992 machinery, materially different math.
- The effective rate rose to 12.6% for C-corporations and Section 962 electors (the Section 250 deduction was cut from 50% to 40% of the inclusion).
- The QBAI exclusion is gone. Under GILTI you could exclude a deemed 10% return on tangible business assets; under NCTI every dollar of tested income is included. Capital-intensive businesses are hit hardest.
- The foreign tax credit haircut improved — Section 962 electors and corporate shareholders can now credit 90% of Canadian corporate tax paid, up from 80%.
- CCPC owners paying the small business rate remain exposed: combined small-business rates (roughly 9–13% depending on province) fall below the high-tax exception threshold of 18.9%, so the exception generally does not shelter that income.
What Actually Changed: GILTI vs NCTI
The mechanics US shareholders of controlled foreign corporations (CFCs) know from GILTI carry over: if US persons owning at least 10% each control more than 50% of your Canadian corporation, its active retained earnings flow through to your US return each year via Form 8992, whether or not you take a dollar out. What changed is how much income is included and what rate applies.
| Feature | GILTI (through 2025) | NCTI (from 2026) |
|---|---|---|
| Section 250 deduction | 50% of inclusion | 40% of inclusion |
| Effective rate (C-corp / §962) | 10.5% | 12.6% |
| QBAI / tangible-asset exclusion | 10% deemed return excluded | Eliminated |
| Foreign tax credit allowed | 80% of foreign tax | 90% of foreign tax |
| Individual without §962 election | Ordinary rates, no §250 deduction | Unchanged — ordinary rates up to 37% |
Why Canadian CCPC Owners Are Hit Hardest
The high-tax exception survives into the NCTI era: if your corporation''s income already bears foreign tax at more than 90% of the US corporate rate — that is, above 18.9% — you can generally elect to exclude it from the regime entirely. This is where the Canadian corporate rate structure creates a trap.
A CCPC''s active business income up to the small business limit is taxed at combined federal-provincial rates of roughly 9% to 13% depending on province — well below the 18.9% threshold. That income cannot use the high-tax exception. Income taxed at the general corporate rate (roughly 23% to 31% combined) clears the threshold comfortably. The result is counterintuitive: the very tax break that makes a CCPC attractive to a Canadian owner — the small business deduction — is what keeps a US owner exposed to annual NCTI inclusions.
The QBAI elimination compounds this. A Canadian corporation holding equipment, vehicles, or real property used in the business could previously shield a deemed 10% return on those assets from GILTI. From 2026, that shield is gone — a construction company, medical practice with an equipped clinic, or manufacturer now has its full tested income in scope.
