US Secures Landmark Global Tax Exemption, Shielding Employee-Owned Firms

WASHINGTON, D.C. – January 09, 2026 – In a significant diplomatic victory for American businesses, the Trump administration has successfully negotiated a sweeping exemption for all U.S. companies from a new 15% global minimum tax. The agreement, announced this week by the Organization for Economic Cooperation and Development (OECD) and involving more than 145 countries, establishes a special “side-by-side” arrangement that shields American corporations, particularly the nation’s growing number of employee-owned businesses, from what advocates had feared would be damaging extraterritorial tax overreach.

The deal provides a critical safeguard for the unique structure of Employee-Owned S Corporations (S ESOPs), protecting the retirement savings of more than a million American workers. Business groups and proponents of employee ownership are hailing the outcome as a major win that preserves U.S. tax sovereignty and reinforces the competitiveness of American companies on the world stage.

A Diplomatic Breakthrough in Global Tax Policy

The agreement marks the culmination of months of tense negotiations surrounding the OECD’s ambitious “Pillar Two” framework, which was designed to ensure large multinational enterprises (MNEs) with revenues over €750 million pay a minimum effective tax rate of 15% in every jurisdiction they operate. Without an exemption, U.S. companies could have been subjected to “top-up taxes” levied by foreign governments under rules known as the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR).

The Trump administration, led by Treasury Secretary Scott Bessent, argued forcefully that the U.S. tax system—specifically its Global Intangible Low-Taxed Income (GILTI) and corporate alternative minimum tax (CAMT) regimes—already achieves the policy goals of the global minimum tax. This position was central to securing the “Side-by-Side (SbS) Safe Harbour,” which officially recognizes the U.S. system as a qualified equivalent. As a result, U.S.-parented multinational groups are now exempt from the IIR and UTPR, effective for fiscal years beginning on or after January 1, 2026.

This outcome follows a concerted effort by the administration, which upon taking office in 2025, declared that the OECD’s rules would have no effect in the U.S. without Congressional approval. The diplomatic push reportedly included the U.S. dropping a proposed retaliatory “revenge tax” that would have targeted countries imposing what it deemed unfair taxes on American firms. The successful negotiation has been praised by leadership on the House Ways and Means and Senate Finance Committees, who were instrumental in supporting the Treasury’s work.

Protecting the Stakes of American Worker-Owners

For America’s employee-owned businesses, the stakes of the negotiation were particularly high. The Employee-Owned S Corporations of America (ESCA), an advocacy group representing over 4,000 S ESOPs, warned that the OECD rules posed a direct threat to the financial security of their 1.1 million employee-owners.

S ESOPs are a uniquely American structure where a company’s profits, which fund employee retirement accounts, are generally not taxed at the corporate level. Experts feared the Pillar Two framework would “look through” the foreign subsidiaries of these companies to tax their U.S. income, effectively imposing an entity-level tax that would devalue the ownership stakes held by workers in their retirement plans. Between 2002 and 2022, these companies distributed over $134 billion in retirement savings to employee-owners, highlighting the model's significant role in wealth creation for American workers.

“From the beginning, US Treasury officials acknowledged the uniquely American S ESOP structure that allows workers to save for retirement through ownership where they work,” said Stephanie Silverman, President and CEO of ESCA. “They advocated and negotiated tirelessly to ensure that American workers would not be subject to new foreign taxes, decreasing the value of their ownership stake. We commend the Administration's prioritization of policies aimed at supporting America's workforce and allowing ESOP companies to continue to thrive.”

By securing the exemption, the administration has ensured that the value built within these companies remains with their employee-owners, reinforcing the stability of a business model that spans industries from heavy manufacturing and defense to healthcare and construction.

A Contentious Carve-Out on the World Stage

While celebrated by many U.S. business interests, the special exemption has not been without controversy abroad. The deal has drawn sharp criticism from tax transparency advocates and created friction with other major economies. As recently as last summer, reports indicated that nearly 30 countries, including economic powerhouses like China, Germany, and France, had expressed serious concerns. They worried that a broad U.S. carve-out could undermine the integrity of the global tax framework and create a competitive disadvantage for their own companies, which remain fully subject to the Pillar Two rules.

The FACT Coalition, a U.S.-based group advocating for tax transparency, labeled the agreement a “regrettable setback” for the global fight against corporate tax avoidance. The group argued that the deal effectively allows large U.S. corporations to continue using tax havens and that the administration prioritized low corporate taxes over global fairness.

Conversely, other American industry groups, such as the National Foreign Trade Council (NFTC) and the Investment Company Institute (ICI), welcomed the safe harbor. They view it as a crucial step toward a more predictable international tax system that recognizes the robustness of U.S. tax law and allows American companies to compete globally without being penalized by duplicative foreign taxes.

The Path Forward: A New but Complex Landscape

This landmark agreement solidifies the viability of the ESOP model and asserts U.S. sovereignty in tax policy, setting a powerful precedent for future international negotiations. However, the landscape for multinational American businesses is not entirely free of new complexities. While shielded from the main IIR and UTPR mechanisms, U.S. companies, including S ESOPs with international operations, will still be subject to Qualified Domestic Minimum Top-up Taxes (QDMTTs) that individual foreign countries may implement.

Furthermore, companies will face new and significant compliance burdens associated with the Pillar Two framework, such as filing the GloBE Information Return. Navigating this new environment will require strategic planning around governance, technology, and tax incentives. Although a major threat has been averted, American firms must now adapt to a global tax system that, while accommodating U.S. interests, remains a complex and evolving regulatory field.