Section 899: Trump's Response to Global Minimum Tax Initiatives

As global tax policy evolves, new U.S. legislation is adding complexity for multinational businesses—and the CPAs who support them. The “One Big, Beautiful Bill,” includes provisions that represent a significant shift in the U.S. tax landscape. Among its most notable international elements is Section 899, a response to the OECD’s Pillar Two framework and global minimum tax efforts.

A Quick Look Back: TCJA and the Global Tax Conversation

The 2017 Tax Cuts and Jobs Act (TCJA) dramatically reshaped international tax for U.S.-based multinational corporations. It introduced several key provisions aimed at discouraging base erosion and profit shifting, including:

• Global Intangible Low-Taxed Income (GILTI)
• Foreign-Derived Intangible Income (FDII)
• Base Erosion and Anti-Abuse Tax (BEAT)

These measures signaled a more aggressive stance by the U.S. in curbing income shifting to low-tax jurisdictions. But global momentum on tax reform didn’t stop there.

The OECD’s Pillar Two Framework: A Global Minimum Tax

In the years following the TCJA, the Biden Administration worked alongside the Organization for Economic Cooperation and Development (OECD) and more than 140 countries to develop the Pillar Two framework, aimed at addressing ongoing concerns around base erosion and profit shifting (BEPS).

Pillar Two proposes a 15% global minimum tax on multinational corporations, implemented through three primary mechanisms:

• Income Inclusion Rule (IIR) – Applies top-up tax to parent entities when subsidiaries are taxed below the minimum rate.
• Undertaxed Profits Rule (UTPR) – Allows jurisdictions to deny deductions or require adjustments where income is undertaxed.
• Qualified Domestic Minimum Top-Up Tax (QDMTT) – Enables countries to impose their own top-up tax before others do.

While the OECD sees Pillar Two as a way to level the international playing field, critics in the U.S.—particularly President Trump—have pushed back against the framework.

Section 899 – Trump’s Response to Pillar Two

Section 899 of the proposed U.S. tax legislation aims to counter what lawmakers view as “unfair” foreign tax practices stemming from Pillar Two. Specifically, it targets income from jurisdictions that impose discriminatory taxes on U.S. entities.

If enacted, Section 899 would impose additional U.S. taxes on income earned by foreign individuals or entities linked to “discriminatory foreign countries,” including:

• Foreign governments, sovereign wealth funds, and public agencies
• Individuals or organizations based in—or effectively managed from—those countries
• Entities that are directly or indirectly owned or controlled by the above

Countries potentially affected include Norway, China, the United Arab Emirates, Kuwait, and Singapore—all of which have substantial investments in the U.S. via real estate, securities, and other assets. Sovereign wealth funds from these nations would likely face higher U.S. tax burdens under the new regime.

What This Means for CPA Firms and Their Clients

While the bill’s passage remains uncertain, Section 899 signals a more confrontational stance from the U.S. toward foreign tax systems—particularly those aligned with OECD minimum tax principles. For CPA firms advising international clients, this could create new exposure and planning challenges.

Key considerations include:

• Reassessing foreign ownership structures and their exposure to U.S.-sourced income
• Preparing for additional tax compliance burdens on foreign investors and multinational clients
• Advising on cross-border restructuring and investment strategies in light of shifting global tax rules
• Educating clients on how sovereign wealth fund investments and joint ventures may be impacted

Stay Ahead of Global Tax Changes

Whether or not Section 899 is enacted in its current form, the U.S. is signaling a continued interest in shaping—and challenging—the global tax narrative. CPA firms must be prepared to advise clients through an increasingly fragmented and politicized international tax environment.

If your clients have international exposure or investments tied to foreign entities, now is the time to assess the risks and start planning.

Reach out to McGuire Sponsel’s Global Business Services team to learn how we can support your firm and your clients in navigating cross-border tax developments with clarity and confidence.