🎧 Listen to This Article
On June 26, 2025, the US Treasury Department formally urged Congress to eliminate a controversial provision from former President Trump’s flagship budget bill, known as Section 899. This measure would have allowed the US government to impose retaliatory taxes on foreign companies and investors from countries that the US considers to have punitive or discriminatory tax policies.
The call to remove Section 899 follows a significant breakthrough in international tax cooperation. Treasury Secretary Scott Bessent announced that the US had secured a crucial agreement with the Group of Seven (G7) nations, which dominate the Organization for Economic Cooperation and Development (OECD). This agreement exempts US companies from the global minimum corporate tax introduced under the OECD’s “Pillar 2” framework, rendering Section 899 unnecessary.
Understanding Section 899 and Its Impact
Section 899 was designed as a countermeasure against countries that impose what the US labels as punitive tax policies. It would have empowered the US to impose additional taxes on companies and investors from such countries, essentially as a form of retaliation.
While the provision was included in the budget bill that passed the House of Representatives, it sparked considerable concern among businesses and investors. Many feared that Section 899 could discourage foreign investment in the United States and lead to escalating tax disputes with major trading partners. Banks and multinational corporations warned that the measure might trigger a retreat from US assets and disrupt cross-border investments.
The OECD Global Minimum Tax and the G7 Deal
The OECD’s two-pillar plan, agreed upon in 2021 by more than 135 countries, aims to modernize international tax rules to address the challenges of the digital economy and curb tax avoidance by multinational corporations.
- Pillar 1 focuses on reallocating taxing rights among countries, especially for large digital companies.
- Pillar 2 introduces a global minimum corporate tax rate of 15%, ensuring that companies pay a baseline level of tax regardless of where they operate.
Pillar 2 began coming into effect in 2024, with many countries adopting its rules to close tax loopholes. However, the US initially had reservations, particularly about the risk of foreign governments imposing additional top-up taxes on US multinationals under the so-called undertaxed profits rule.
The recent agreement between the US Treasury and the G7 addresses these concerns. Under the deal, G7 countries have agreed not to apply Pillar 2 top-up taxes to US companies, acknowledging that US tax schemes are “broadly equivalent” to the OECD standards. This understanding effectively removes the need for Section 899’s retaliatory tax provisions.
Political and Business Reactions
Republican leaders in the Senate Finance Committee and House Ways and Means Committee have indicated they will drop Section 899 from the pending budget legislation, which is currently under Senate consideration.
The move has been welcomed by business groups and international partners. UK Chancellor Rachel Reeves called the development “important,” emphasizing that it provides certainty for businesses operating across borders. Canadian Finance Minister François-Philippe Champagne also praised the decision.
Despite this progress, some tax experts note that other sections of the US tax code, such as Section 891, which targets discriminatory taxation by foreign governments, remain in place. These provisions continue to pose potential challenges for international tax relations.
What This Means Going Forward
The removal of Section 899 marks a significant shift in US tax policy, signaling greater alignment with global efforts to harmonize corporate taxation and reduce harmful tax competition. It reflects a more cooperative approach to international tax reform compared to previous stances.
For multinational corporations, this development reduces uncertainty and the risk of punitive tax measures, smoothing the path for cross-border investment and operations.
As countries continue to implement OECD Pillar 2 rules and negotiate further on Pillar 1, this agreement sets a constructive precedent for resolving conflicts and fostering global tax stability.
For further details, clarification, contributions, or any concerns regarding this article, please get in touch with us at editorial@tax.news. We value your feedback and are committed to providing accurate and timely information. Please note that our privacy policy will handle all inquiries.
