On May 22, as the House of Representatives passed H.R. 1—the “One Big Beautiful Bill Act” (OBBBA)—by a 215-214 margin, I outlined the implications of Section 112029 of H.R.1 in my earlier Forbes article. The provision, “Enforcement of Remedies Against Unfair Foreign Taxes,” would have added a new Section 899 to the Internal Revenue Code. As detailed in my article, the measure proposed escalating U.S. tax and withholding rates by 5 to 20 percentage points on income from “discriminatory foreign countries.” It targeted U.S.-source dividends, interest, royalties, effectively connected income, branch profits, and the Base Erosion and Anti-Abuse Tax, even overriding treaty reductions. The intent was to counter unilateral foreign measures like digital services taxes and diverted profits taxes, which U.S. policymakers viewed as discriminatory against American persons and entities.
At the time, Section 899 appeared poised for inclusion in OBBBA, reflecting frustration with foreign taxes that lack traditional nexus to local profits. However, by late June, the provision was removed from the final bill, signed into law by President Trump on July 4. This change followed Treasury Secretary Scott Bessent’s announcement of a G7 agreement on June 26, exempting U.S. companies from key elements of the OECD’s Pillar Two global minimum tax framework.
The G7 Deal Forestalled Enactment Of Section 899
The G7 deal was reached with the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom and addressed U.S. concerns over the 15% global minimum corporate tax. This informal compromise introduced a “side-by-side” approach, exempting U.S. multinationals from the so-called Income Inclusion Rule and Undertaxed Profits Rule. With final details still tied to OECD negotiations, it also preserved U.S. tax treatment for domestic and foreign profits, including incentives such as R&D credits and state-level subsidies, without additional foreign top-up taxes. This agreement was referenced in a G7 statement under Canada’s 2025 presidency, and was framed as a high-level understanding. Implementation was tied to ongoing OECD negotiations.
Full removal of the new Code Section 899 provision from the OBBBA signaled a shift toward multilateral resolution rather than a unilateral retaliation by America. While we may never know, it is possible that proposing the provision in the first place may have been to serve as a bargaining chip, though the G7 deal focused narrowly on Pillar Two and left broader issues like digital services taxes unaddressed.
OECD Pillar Two: Progress and Persistent Challenges
The OECD’s Pillar Two framework seeks to impose a 15% minimum tax on multinational enterprises with annual revenues exceeding a certain threshold. The G7 agreement offered potential resolutions to these issues, yet technical negotiations appear to have stalled. OECD working groups have not yet endorsed specific U.S. exclusions, which could leave American firms open to additional levies imposed by partners such as the United Kingdom and Germany.
Possible Revival of Code Section 899 Revenge Tax?
Now, barely three months after the understanding brokered by the G7, the stability of the G7 arrangement is in question. Certain OECD documents were leaked, indicating there were challenges in implementation of the possible Pillar 2 exemptions since various countries were opposed to an arrangement that would exempt U.S. companies from the global minimum tax.
In a closed-door briefing with House Republican lawmakers on September 9, 2025, Treasury Assistant Secretary for Tax Policy Kenneth Kies indicated the department’s support for reviving Section 899 if the OECD fails to finalize Pillar Two exemptions by late 2025 deadlines. According to reports from attendees, Kies stated that Treasury would back congressional initiatives to revive Section 899 if the G7 commitments fail to materialize, with a focus on transitional safe harbor provisions and carve-outs for qualified domestic minimum top-up taxes.
The implementation delays have spurred responses from Republican leaders. House Ways and Means Committee Chair Jason Smith has indicated revival of Section 899 may possibly be forthcoming in a supplemental spending bill this fall. Meanwhile, the U.S. positions have drawn criticism and opposition from other countries. Some nations contend that the proposed exemptions would grant American companies an undue competitive edge. Clearly, a number of unresolved issues persist.
Section 899 Revenge Tax: Implications for U.S. Investors and Multinationals
Revival of Section 899 would place added pressure on investments flowing into the United States from targeted jurisdictions. As I explained in my earlier Forbes article, the graduated surcharges ranging from 5 to 20 percentage points could discourage such inflows, affecting areas such as intellectual property royalties and effectively connected income in the energy sector. Investors from affected countries may seek other jurisdictions in which to invest. Portfolio investors could elsewhere if they see withholding rates on dividends or interest increase from a beneficial treaty rate of 15% to 35% or 45%. Multinational companies having U.S. operations might remain in America, but these enterprises might certainly be less likely to expand.
Pres. Trump Executive Order Authority: A Unilateral Path for Partial Retaliation?
Complete enactment of Section 899 would necessitate changes to the Internal Revenue Code through legislation. However, President Trump retains authority under existing Internal Revenue Code Section 891 to double tax rates on discriminatory nations via executive order. Such a step from President Trump certainly has ample precedent. If this path were chosen, it could serve as a temporary measure, pending comprehensive legislative action. Code Section 891 is rarely invoked but it empowers the president to issue a proclamation doubling U.S. tax rates applicable to citizens, residents, or corporations of a foreign country if the Treasury Secretary certifies discriminatory treatment of U.S. persons.
Section 891 is clearly on President Trunp’s radar. He issued a memorandum in February directing the Secretary of the Treasury to examine discriminatory taxes that might be actionable under that section. If President Trump exercised authority under Section 891, this could target withholdings on dividends, interest, and royalties—mirroring some effects of Section 899—without congressional approval. However, it stops short of creating new surcharges as the proposed Section 899 provision would.
The Revenge Tax Cometh? Stay Tuned
One must wonder whether Section 899’s original appearance in the bill was truly intended as a negotiating tool, now being redeployed in light of the current impasse. The G7 accord provided a temporary reprieve, yet Kies’ recent remarks highlight how fragile that arrangement may prove.
Watch this space: With OECD milestones nearing, U.S. strategy could shift toward unilateral measures if the continued negotiations do not yield further advances.
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