The Internal Revenue Service proposed regulations Thursday that would soften the blow of a new levy targeting companies that book income in low-tax countries.

One of the measures would allow large multinationals to consolidate, or calculate the tax one time for all of their entities, rather than requiring them to do potentially dozens of calculations for individual subsidiaries, according to rules released by the Treasury Department.

The Republican law slashed the corporate tax rate to 21 percent from 35 percent, and shifted the U.S. to a system of taxing its companies on their domestic profits only. Those changes required guardrails -- like the tax on Gilti, or global intangible low-tax income, to ensure multinationals pay at least something on their future overseas profits.

The rules give guidance on how to calculate the Gilti tax, which effectively sets a 10.5 percent rate to apply to a company’s “excess” profits earned overseas through some of their foreign subsidiaries.

“We are providing clarity to taxpayers and closing loopholes that previously allowed for inappropriate international tax planning and shifting profits overseas,” Treasury Secretary Steven Mnuchin said in a statement.

The question of whether consolidated returns would be permitted was the most significant issue associated with Gilti, according to a report in May by the New York State Bar Association’s tax section. Without the clarity, Gilti could produce “very arbitrary results and invite restructurings solely to minimize tax liability,” the report said.

It’s important for multinationals to be able to file a consolidated return because that could help them take advantage of foreign tax credits to offset the Gilti tax.

Still, the regulations don’t address areas critical to assessing the tax owed, such as how the tax will take into account foreign tax credits and business expenses. Multinationals will need to wait another two months for those rules, according to a Treasury official.

The piecemeal guidance process, and the lack of understanding about the ultimate amount of tax that will be paid until all the parts are finalized, underscore the complexity of the tax law’s international provisions.

‘Sledge Hammer’

Tax advisers have been modeling the effects of the new law for their multinational clients, but because many of the new provisions are interconnected, and implementation may be governed by old tax regulations still on the books, they’re only able to estimate the amount of tax due.

That’s been a frustration for many publicly traded companies and their investors, who are anxious to understand how the new tax law affects them.

Gilti was intended to prod U.S. technology and pharmaceutical companies into holding their valuable intellectual properties in the U.S. Currently, many hold their patents in subsidiaries in Ireland or other low-tax countries. The tax is intended to apply only in cases where a company’s cumulative overseas tax bill is below 13.125 percent, or 16.4 percent after 2025.

However, tax lawyers and accountants say quirks in the way the tax is calculated mean it will likely hit other companies, such as big banks with offshore operations, even when they already pay effective foreign tax rates above the threshold.

Republican Intent

Bank lobbyists have urged Treasury to come up with a fix that would lessen the pain from Gilti, saying an adjustment is needed to make the tax consistent with the intent of Republican lawmakers who wrote the legislation.

“The Gilti provision was set up like it was performing a tooth extraction with a sledge hammer,” Brent Felten, managing director of international tax at accounting firm Crowe, said before the regulations were released.

Companies have been holding off making decisions about potential deals and about how to record the liabilities on their financial statements until they learned the details of how the IRS would administer the Gilti tax, Felten said.

Treasury officials have said they plan to issue guidance later this year on the other two major international provisions in the tax overhaul -- a tax break encouraging companies to export U.S.-made goods, known as the foreign derived intangible income deduction, and the base-erosion and anti-abuse tax on payments corporations make to foreign subsidiaries.