U.S. multinational companies will not be subject to global minimum tax rules developed by the Organization for Economic Cooperation & Development nations, as part of an agreement announced by the OECD and U.S. Treasury Department Monday.

The OECD announced 147 countries agreed to adopt a "side-by-side system" that creates safe harbors to Pillar 2 rules, which aim to impose a 15% global minimum tax on multinational companies.

Without an agreement, the Trump administration’s opposition to the global tax deal favored by former President Joe Biden would have left multinational companies’ 2026 tax strategies in limbo. 

The Treasury Department opposes Pillar 2, arguing existing U.S. global intangible law-taxed income (GILTI) rules effectively combat global tax avoidance by shifting profits to low-tax jurisdictions.

In response to that opposition, the 147 countries agreed Monday to create a side-by-side system available to tax jurisdictions with domestic and worldwide tax regimes that "have and maintain similar policy objectives, overlapping scope, and a complementary policy impact" aligned with Pillar 2 aims.

The carve out means U.S. companies will not be subjected to Pillar 2's income inclusion rule and its undertaxed profits rule, two elements strongly opposed by the Treasury Department.

"This side-by-side agreement recognizes the tax sovereignty of the United States over the worldwide operations of U.S companies and the tax sovereignty of other countries over business activity within their own borders," Treasury Secretary Scott Bessent said in a Monday statement.

"Further, the agreement protects the value of the U.S. R&D credit and other Congressionally approved incentives for investment and job creation in the United States, fulfilling the shared goal of U.S. leadership in innovation and technological advancement," Bessent said.

The effective tax rate safe harbor and an extension of an existing reporting safe harbor simplify U.S. companies' compliance burden and associated costs.

The OECD said work is "ongoing" for additional safe harbors to deal with "low-risk situations."

The effective tax rate safe harbor calculates tax rates on income and taxes drawn from a company's existing reporting obligations ”with minimal adjustments," an OECD document said. To allow sufficient time for companies to adopt the new effective tax rate rules, the agreement extends for one year an existing country-by-country reporting safe harbor.

The agreement "enhances tax certainty, reduces complexity, and protects tax bases," OECD Secretary-General Mathias Cormann said in a Monday statement.

"Under this side-by-side agreement, U.S. companies continue to be governed by U.S. tax law, while OECD Pillar 2rules are adjusted to ensure they do not unfairly apply to U.S.-parented companies," House Ways and Means Committee member Ron Estes (R-Kan.) said in a Monday statement.

“I cannot overstate the importance of this development for protecting U.S. tax sovereignty, American workers, and U.S. businesses competing globally," Estes said.

Washington-based Investment Company Institute welcomed the development in a Monday statement, saying safe harbors "align with Congress and the administration’s efforts to protect US business interests overseas from duplicative minimum foreign taxes."

“The new OECD framework also forestalls the need for the U.S. to employ a retaliatory tax, which could have had the unintended consequence of discouraging foreign investment in US equities through funds," the ICI statement said.

The deal also drew criticism. The Financial Accountability and Corporate Transparency Coalition, which opposes corporate use of tax havens, in a release Monday called the deal a “regrettable setback for the global fight against corporate tax avoidance.” It also noted that Pillar 2 was the result of years of negotiations, the results of which are being reversed by the Trump administration.

“This deal risks nearly a decade of global progress on corporate taxation only to allow the largest, most profitable American companies to keep parking profits in tax havens,” said FACT policy director Zorka Milin said in a statement in the release. “The Trump administration has chosen to prioritize maintaining rock-bottom taxes for big corporations to the detriment of ordinary Americans and our allies across the globe.”

The OECD scheduled a Jan. 13 webinar to discuss the agreement.