U.S. multinational corporations will be exempted from the rules developed by the Organisation for Economic Co-operation and Development (OECD) member countrieson the global minimum tax, as part of an agreement announced Monday between the OECD and the U.S. Treasury Department.

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

Without this agreement, the Trump administration's opposition to the global tax deal (which former President Biden supported) would have left multinational companies' 2026 tax strategies in a state of uncertainty.

The U.S. Treasury opposed Pillar 2, arguing that the existing Global Intangible Low-Taxed Income (GILTI) rules already effectively combat tax avoidance by companies shifting profits to low-tax jurisdictions.

In response to this opposition, 147 countries agreed on Monday to establish a side-by-side system applicable to jurisdictions whose domestic and global tax systems "have and maintain similar policy objectives, overlapping scope, and complementary policy effects" and are aligned with the goals of Pillar 2.

This exemption means that U.S. companies will not be subject to Pillar 2's income inclusion rule and undertaxed profits rule, which are the very provisions the Treasury strongly opposed.

"This side-by-side agreement recognizes the tax sovereignty of the United States over its companies' global operations, as well as the tax sovereignty of other countries over business activities within their territories," Treasury Secretary Scott Bessent said in a statement Monday.

"Furthermore, the agreement protects the value of the U.S. research and development tax credit and other incentives approved by Congress to promote U.S. investment and employment, achieving the shared goal of U.S. leadership in innovation and technological advancement," Bessent added.

The effective tax rate safe harbor and the extension of the existing reporting safe harbor simplify compliance burdens and associated costs for U.S. companies.

The OECD said that additional safe harbor work for "low-risk scenarios" is "ongoing."

The effective tax rate safe harbor calculates rates based on income and tax data from companies' existing reporting obligations, "requiring only minimal adjustments," according to an OECD document. To give companies sufficient time to adopt the new effective tax rate rules, the agreement extends the existing country-by-country reporting safe harbor by one year.

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

"Under this side-by-side agreement, U.S. companies remain subject to U.S. tax law, and the OECD Pillar 2 rules are adjusted to ensure they do not unfairly apply to U.S. parent companies," said Rep. Ron Estes (R-Kansas), a member of the House Ways and Means Committee, in a statement Monday. "I cannot overstate the importance of this development in protecting U.S. tax sovereignty, American workers, and U.S. businesses competing globally," Estes said.

The Washington-based Investment Company Institute welcomed the development in a statement Monday, saying the safe harbor "is consistent with congressional and administration efforts to protect U.S. companies' overseas interests from duplicative minimum foreign taxes."

"The new OECD framework also avoids the need for the United States to resort to retaliatory taxes, which could have the unintended consequence of discouraging foreign investment in U.S. equities through funds," the ICI statement said.

The agreement also drew criticism. The FACT Coalition, which opposes corporate use of tax havens, called the agreement "a regrettable step backward in the global fight against corporate tax avoidance" in a statement released Monday. The group also noted that Pillar 2 was the result of years of negotiations, and the Trump administration is reversing those achievements.

"This agreement puts nearly a decade of global corporate tax progress at risk, all to allow the largest, most profitable U.S. companies to continue parking profits in tax havens," said Zorka Milin, policy director at FACT, in the statement. "The Trump administration has chosen to prioritize maintaining ultra-low tax rates for big corporations at the expense of ordinary Americans and our global allies."

The OECD has scheduled awebinar on January 13to discuss the agreement.