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Section 899 Targeting “Unfair Foreign Taxes” To Be Removed From One Big Beautiful Bill

On June 26, 2025, the U.S. Treasury Secretary announced that the U.S. has reached an agreement with its G-7 allies that the OECD will establish an exemption for U.S. companies from OECD Pillar 2 taxes in exchange for the Trump Administration encouraging Congressional Republicans to remove the proposed Section 899 from the One Big Beautiful Bill Act (the “Bill”).

On May 22, 2025, the House of Representatives narrowly passed their version of the Bill which included the proposed Section 899 of the Internal Revenue Code. Often referred to as the “revenge tax,” the proposed Section 899 would have increased U.S. withholding and other tax rates for “applicable persons” of countries that impose “unfair foreign taxes” on U.S. persons. On June 16, 2025, the Senate Finance Committee released its own version of the Bill with a revised version of the proposed Section 899. Our prior client alerts discussing the Bill can be found here and here. 

Following the announcement by the U.S. Treasury Secretary, the House Ways and Means Committee Chair and Senate Finance Committee Chair made a joint statement confirming Congressional Republicans’ agreement to remove the proposed Section 899 from the Bill, effectively killing it for the time being. However, the joint statement also included a reservation that they stand ready to reintroduce the proposed Section 899 if the implementation of the pact with the G-7 allies is not satisfactory, stating that: “Congressional Republicans stand ready to take immediate action if the other parties walk away from this deal or slow walk its implementation.”

The removal of the proposed Section 899 is viewed as a positive development by the business community, which was concerned about the potential impacts of the proposed Section 899, including the potential increase in effective U.S. tax rates for multinationals doing business in the U.S., increased financing costs for U.S. borrowers, and negative implications for inbound investment into the U.S. from OECD jurisdictions.