Congressional Republicans agreed on Thursday to remove a provision from former President Donald Trump’s budget bill that would have allowed new taxes on foreign investors.
The decision followed a request earlier in the day from Treasury Secretary Scott Bessent, who said the measure was no longer needed after the U.S. reached an agreement with G7 countries on the OECD global tax deal.
The provision, known as Section 899, would have allowed the U.S. to impose taxes on foreign companies and investors from countries with tax rules seen as unfair to American businesses. It had raised concerns among banks and investors, who feared it could reduce foreign investment in the U.S.
Bessent said the new understanding with G7 members would exempt U.S. companies from the OECD’s Pillar 2 minimum tax, which requires a 15 percent corporate tax rate and allows other countries to collect the difference if the home country’s tax is lower.
The OECD global tax framework, agreed in 2021 by more than 135 countries, aims to reduce tax avoidance by multinationals. While Pillar 2 has been adopted by several countries, the first part of the deal, focused on digital tax rules, has not been implemented.
Bessent said his department asked lawmakers to strike Section 899 to avoid unnecessary tax burdens on U.S. companies and prevent them from paying over $100 billion to foreign governments in the next ten years.
The House of Representatives has already passed the budget bill. The Senate is expected to vote soon. Leaders from the Senate Finance and House Ways and Means Committees confirmed they would remove the provision but said they were ready to act if the deal with other countries breaks down.
The Global Business Alliance estimated that keeping the tax measure could have cost the U.S. economy $100 billion per year and around 700,000 jobs.
European and Canadian officials welcomed the U.S. move, and UK Chancellor Rachel Reeves said it would offer more clarity for businesses. An EU official noted the agreement still needs formal approval by the OECD.
