U.S. Congress Backs Off Section 899 Retaliatory Tax After G7 Deal: What It Means for Business

Disclaimer: The content in this blog was written prior to the passage of the “One Big Beautiful Bill” and may not reflect the most current tax laws or regulatory updates. For the latest guidance and implications of the new legislation, please consult with your McGuire Sponsel advisor or refer to our updated resources.

In a development that many in the business and investment community have been watching closely, the U.S. Congress has announced it will no longer pursue the controversial Section 899 retaliatory tax provisions that were included in the One Big Beautiful Bill. Late on June 26, 2025, Treasury Secretary Scott Bessent confirmed that he had formally requested that Congressional leaders remove Section 899 from the bill, following a breakthrough agreement with the United States’ G7 allies.

The G7 Deal: Cooperation over Confrontation

So, what changed? The short version: diplomacy worked. Under the new agreement, G7 countries have committed to excluding U.S. multinational companies from the OECD’s Pillar 2 global minimum tax when imposed by other nations. In exchange, the U.S. will withdraw Section 899 from the legislative process. According to Secretary Bessent, this resolution offers “greater certainty and stability for the global economy” and will help drive growth and investment both in the U.S. and globally. The U.S. will also work with other countries through the OECD-G20 Inclusive Framework to implement the agreement.

What Was Section 899?

Section 899 was widely viewed as a retaliatory tool—dubbed by some as a “revenge tax.” It was designed to counter foreign countries that imposed what the U.S. considered “unfair taxes” on American companies, especially under new global tax frameworks, such as Pillar 2. Had it been enacted, Section 899 would have imposed punitive measures on foreign entities and individuals, including higher U.S. tax rates and an expanded version of the Base Erosion and Anti-Abuse Tax. The target: any country that imposed taxes on U.S. businesses that the U.S. deemed discriminatory.

The measure had already passed the House as part of H.R. 1 and appeared in a revised form in the Senate Finance Committee’s version of the One Big Beautiful Bill.

Market Relief and Political Response

The potential economic fallout from Section 899 had drawn concern from Wall Street, international investors, and global businesses with operations in the U.S. The provision’s complexity, broad potential reach, and uncertain compliance burdens raised alarms about its impact on foreign direct investment. Following Secretary Bessent’s announcement, Senate Finance Committee Chair Mike Crapo (R-Idaho) and House Ways and Means Committee Chair Jason Smith (R-Mo.) quickly confirmed that Section 899 would be pulled from the bill. In a joint statement, they highlighted that the agreement will help “preserve U.S. tax sovereignty and allow U.S. tax laws to co-exist with the Pillar 2 regime.”

What’s Next?

While the immediate risk of Section 899 is off the table, CPA firms should advise their clients to remain vigilant. Businesses can breathe a sigh of relief, but this story isn’t over. Attention will now turn to how the U.S. and its G7 partners implement this new understanding within the broader OECD-G20 Inclusive Framework.

One thing is clear: global tax negotiations remain a moving target. Firms should encourage their clients with international operations to closely monitor developments and be ready to adapt as changes occur. Keeping abreast of these discussions will be vital in ensuring compliance and strategic planning for future tax obligations.

If you have any questions or need further assistance, please don’t hesitate to reach out to our Global Business Services team.