Those expenses end up shrinking the foreign income pile on which the company owes U.S. tax, in turn diminishing the value of credits for foreign taxes they’ve already paid on those units. The result for companies with large expenses can be a higher Gilti bill.

Every dollar of expense allocation may cause an incremental 21 cents of U.S. tax, according to estimates included in a memo called “A Gilti Trap Waiting to Spring” by management consultants Alvarez & Marsal Inc.

Foreign Tax Credits
Companies can now use only 80 percent of foreign tax credits when calculating Gilti, a major shift from nearly a century of law during which the credits were a dollar-for-dollar reduction in taxes. And companies can’t carry forward credits or “cross credit” them to other pots of income, like active earnings by foreign branches, that aren’t caught up by Gilti.

“It’s ‘Oh my gosh, I paid all this foreign tax, but I don’t get to use all these credits,’” Sites said.

The U.S. Chamber of Commerce has requested “regulatory relief in this space because Congressional intent was to limit U.S. tax liability when the foreign tax rate is 13.125 percent or higher,” Caroline Harris, the group’s chief tax policy counsel, said in a statement.

The Securities Industry and Financial Markets Association, a trade and lobbying group, has also comment to Treasury on behalf of its members to ensure the regulations reflect Congress’s intent, said Payson Peabody, a managing director and tax counsel for federal government relations at Sifma.

Treasury Clarification
A Treasury Department official said Treasury’s working on regulations that will clarify how expenses are to be allocated for purposes of the Gilti calculation.

Meanwhile, banks and investors are left with uncertainty.

“Your effective tax rate depends on your foreign taxes and the extent to which you can claim credits for foreign taxes paid against U.S. tax,” said Manal Corwin, KPMG’s principal-in-charge of Washington national tax—international tax policy, and a former Treasury official.

Bank of America Corp. said in its first-quarter earnings report that its savings from the corporate tax cut were “somewhat offset by an increase in U.S. taxes related to our non-U.S. operations,” while Citigroup Inc. said in its 2017 year-end report that it was still trying to assess Gilti’s effects.