Treasury says 'revenge tax' will go from 'big beautiful' bill

by Daniel Flatley and Lauren Vella (BTAX)

The Treasury Department announced a deal with G-7 allies that will exclude US companies from some taxes imposed by other countries in exchange for removing the Section 899 “revenge tax” proposal from President Donald Trump’s tax bill.

“OECD Pillar 2 taxes will not apply to U.S. companies, and we will work cooperatively to implement this agreement across the OECD-G20 Inclusive Framework in coming weeks and months,” Treasury Secretary Scott Bessent said on social media Thursday.

“Based on this progress and understanding, I have asked the Senate and House to remove the Section 899 protective measure from consideration in the One, Big, Beautiful Bill,” he added.

The congressional tax committee chairs, Representative Jason Smith and Senator Mike Crapo, quickly responded that “at the request of Secretary Bessent and in light of this joint understanding to preserve U.S. tax sovereignty” they will remove “proposed tax code Section 899 from the One, Big, Beautiful Bill Act.”

The provision, officially known as Section 899 and informally known as the “revenge tax,” was drafted by House Republicans and supported by the White House to counter several European countries, Canada, Australia and more nations from taxing US firms in a way GOP lawmakers argue is discriminatory.

The tax has sparked fears on Wall Street that the proposal would make it much harder for foreign individuals and companies to invest in the US. The levy targets allies that have digital services taxes on US tech companies, as well as countries imposing a global minimum tax on corporations.

The market reaction was largely muted. The Bloomberg Dollar Index declined for a fourth day, Treasuries rallied and the S&P 500 approached an all-time high, all largely before the deal was announced late Thursday afternoon. 

“Removing Section 899 from the budget negotiations would potentially allow investors to breathe a sigh of relief,” said Gennadiy Goldberg, head of US rates strategy at TD Securities. “That said, it’s difficult to know if the market seriously expected this statute to make it into the final law.”

The measure included in Trump’s bill came to be known as the revenge tax because it would increase tax rates only for countries whose tax policies the US deems “discriminatory.”

Deputy Treasury Secretary Michael Faulkender told Bloomberg News on Wednesday that administration officials were close to a “breakthrough” that would eliminate the need for the revenge tax proposal in Trump’s tax bill.

The Organization for Economic Co-operation and Development has been hosting global talks over corporate taxes, with some of the proposals drawing opposition from the US.

The revenge tax targeted a part of the OECD’s 15% global minimum tax that former Treasury Secretary Janet Yellen helped negotiate while former President Joe Biden was in office. Republicans and Trump administration officials have criticized the deal for ceding US taxing authority to other countries.

The global minimum tax is part of a larger deal agreed to by more than 140 countries at the OECD that seeks to impose a 15% minimum tax rate on multinational companies in every country where they operate.

Trump’s Treasury in recent weeks has pushed for the US tax system to be considered completely separate from the OECD’s global tax framework, arguing that the US already robustly taxes income that American companies earn overseas.