State Approaches to Global Intangible Low-Taxed Income (GILTI)
mapMany states with corporate income taxes include some amount of federally defined Global Intangible Low-Taxed Income (GILTI) in their tax bases. GILTI is a subcategory of foreign profit that is deemed to represent an extraordinary return on foreign assets (above 10 percent) and is therefore suspected to be at least partly comprised of profit that companies have shifted, on paper, to avoid U.S. taxes. The federal government includes only half of GILTI in federal taxable income (potentially rising to 62.5 percent in 2026, if current law remains in effect), meaning that in practice it is subject to a substantially reduced effective tax rate at the federal level. Including GILTI in state corporate tax bases can curb some of the tax savings that companies receive from moving their profits to offshore tax havens, though mandatory worldwide combined reporting (WWCR) offers a more comprehensive solution to this problem.
Twenty-one states plus D.C. include some amount of GILTI in their tax calculations. The effectiveness of these inclusions depends in part on the context in which they are administered. States using a “separate filing” approach to corporate taxation, or allowing for the exclusion of so-called 80/20 companies from water’s edge combined filing groups, are particularly vulnerable to tax avoidance strategies that skirt GILTI inclusion rules. Of the states with GILTI inclusions, Delaware, Maryland, and Tennessee fall into the first category just named while Alaska, Colorado, Connecticut, Montana, New Hampshire, New Jersey, and North Dakota fall into the second.
