“Revenge Tax” is Scrapped From The One Big Beautiful Bill

Doing Business in USA or with US Persons, Uncategorized, Withholding Tax 2 Minutes

BREAKING NEWS — On June 26, 2025, Treasury Secretary Scott Bessent announced a “deal” between the US and the G7 nations (Canada, France, Germany, Italy, Japan, and the UK) to exempt US companies from certain foreign taxes, prompting him to request Congress to drop proposed new Internal Revenue Code Section 899 from the One Big Beautiful Bill.  This controversial proposed new Code provision, dubbed the “Revenge Tax,” was detailed in my earlier blog post.

In a nutshell, Section 899 aimed to counter “unfair foreign taxes” (e.g., digital services taxes or OECD’s Pillar 2 minimum tax) by increasing US tax rates on US income earned by entities or individuals from “offending” foreign countries. The Senate version, released June 16, 2025, capped the tax increase at 15% (reduced from 20% in the House version), exempted portfolio interest, and delayed implementation to January 1, 2027.

The agreement with G7 apparently ensures that US companies are excluded from the OECD’s Pillar 2 taxes, which impose a 15% global minimum corporate tax on certain multinationals. The G7 agreement was narrowly tailored to address Pillar 2 concerns and from what I can tell it did not address the broader issues of Digital Services Taxes or Diverted Profits Taxes. While proposed new Code Section 899 could have targeted countries with DSTs and DPTs, its removal leaves no immediate US mechanism to counter these taxes within the bill.

I wonder if Section 899 was included as a bargaining chip to begin with?

In any event, details of the “deal” are sparse.  The G7 agreement appears to be a high-level “joint understanding” and as yet, there is not any type of  finalized treaty or tax agreement.  It seems that further implementation is expected through OECD negotiations.

The G7 agreement includes a “side-by-side” tax system, as referenced in a statement from the G7 under Canada’s 2025 presidency. This system is designed to exempt US companies from the OECD’s Pillar 2 global minimum tax, specifically the Undertaxed Profits Rule and Income Inclusion Rule, while allowing other G7 nations to maintain their adherence to the 2021 OECD/G20 global tax framework. The term “side-by-side” refers to a structure where US tax laws coexist with the Pillar 2 regime, ensuring US firms are taxed solely under US domestic rules for both domestic and foreign profits, without facing additional levies from other countries’ Pillar 2 mechanisms.

Watch this space!

Posted  June 28, 2025

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One thought on ““Revenge Tax” is Scrapped From The One Big Beautiful Bill”

  1. Pingback: Can Trump Revive The Revenge Tax By Executive Order ? OECD Delays Test G7 Deal – Virginia – US TAX TALK

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