The GILTI tax is essentially a tax on foreign-sourced intangible income. It applies to income that exceeds 10 percent of a controlled foreign corporation’s Qualified Business Asset Investment, broadly defined as fixed assets that are depreciable as trade or business assets excluding intangible property like patents or trademarks. This income is taxed at a 21 percent rate, though corporations can get a 50 percent deduction on GILTI income until 2025, at which point the deduction shrinks to 37.5 percent. If there is no tax paid on the foreign pool of GILTI profits, though, the U.S. would just tax the company 10.5 percent. 

The FDII category, meanwhile, is meant to encourage exports through allowing C corporations to get a deduction equal to 37.5 percent of their FDII plus 50 percent of a combination of its GILTI income and foreign dividend income. 

The study noted that the TCJA defined intangible income as any income exceeding 10 percent of a subsidiary's tangible assets in a country or jurisdiction. The lower those assets are valued, the more income is subject to U.S. taxation and, conversely, the higher they're valued, the less they're subject to tax. Ostensibly, this provision was meant to prevent companies from moving valuable intellectual property to foreign subsidiaries in low-tax nations, which possessed few to no tangible assets. What seems to be happening, though, is that companies are opting to instead increase capital investments, which has the effect of reducing the ratio between intangible income and tangible assets and, therefore, tax liability. Given that FDII is directly affected by GILTI income in its formulation, this provision was also seen as contributing to the increase in foreign capital investment.

The Congressional Budget Office mentioned the possibility of this very issue in an April report last year. 

"By locating more tangible assets abroad, a corporation is able to reduce the amount of foreign income that is categorized as GILTI. Similarly, by locating fewer tangible assets in the United States, a corporation can increase the amount of U.S. income that can be deducted as FDII. Together, the provisions may increase corporations’ incentive to locate tangible assets abroad. (Like profit shifting, such decisions change the locations of reported profits—but they are not classified as profit shifting, because they involve actual economic activity rather than simply reporting.)," said the CBO report.