How GILTI Reform Affects M&A Golden Parachute Planning

Crescent Moran Chasteen, Dave Sturgeon and Yuan Xia authored the article, "How GILTI Reform Affects M&A Golden Parachute Planning" in Law360. The article describes the shift from global intangible low-taxed income, or GILTI, to net controlled foreign corporation tested income. This has a subtle yet important impact on the golden parachute analysis that often plays a critical part of many corporate transactions, extending the reach of the golden parachute rules well beyond U.S.-based employers and executives.

The One Big Beautiful Bill Act, signed on July 4, introduced a seemingly technical change to U.S. international tax law. The budget reconciliation act replaced the global intangible low-taxed income regime with the new net CFC-tested income, or NCTI, framework.

The budget reconciliation act did not directly modify the golden parachute rules governing the identification of disqualified individuals, calculation of the excess parachute payments or the excise tax imposed.

However, as described above, the key impact of the legislation on golden parachute considerations arises from the interaction of three factors: the expanded tax base resulting from the elimination of the deemed return on QBAI, the higher overall effective tax rate under the NCTI regime and the disallowance of deductions for parachute payments under Section 280G.

Read the full article.